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A Cancellation of Chattel Mortgage is a creditor’s (the “mortgagee”) declaration cancelling the chattel mortgage executed in his favor by the debtor (the “mortgagor”) over the property. Once the mortgage is cancelled the property is no longer considered as security for the debt and the mortgagee cannot foreclose the property.
A Cancellation of Chattel Mortgage is used when the parties agree to cancel the mortgage over the property. It is often used when the obligation secured by the mortgage has been fulfilled, cancelled or is no longer existing for any reason.
A Cancellation of Chattel Mortgage may also be used when the parties agree to replace the current property with another property. This will involve cancelling the mortgage over the existing property and executing another mortgage over the new property. In any event the parties are free to cancel the mortgage for any reason.
A Cancellation of Chattel Mortgage protects the mortgagor by putting in writing the fact that the mortgage over his property has been cancelled and the property can no longer be foreclosed. Otherwise, there is a continuing risk that the property will be foreclosed despite the fact there is no valid reason for the foreclosure anymore.
Further, an existing mortgage adversely affects the property’s value and how third persons treat the property in business transactions. For example, a potential buyer will be more apprehensive about buying the property if there’s an existing mortgage over the same. This is especially true if the mortgage is annotated on the Certificate of Title of the property.
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Activities that involve a Cancellation of Chattel Mortgage sometimes use the following documents. You may be interested in them: