What must be true for a security interest in chattel paper to be subordinate?

For a security interest in chattel paper to be subordinate, it is essential that the chattel paper indicates an assignment to another party. Chattel paper is defined as a record that evidences a monetary obligation and a security interest in specific goods, and the assignment indicates that the rights under the chattel paper have been transferred to another entity. This is crucial because, in the world of secured transactions, the priority of security interests can depend on the order in which interests are perfected and the nature of the interests themselves.

When a security interest in chattel paper is indicated as being assigned, this signals to other creditors and parties in interest that there is a competing claim to the underlying collateral. It establishes someone's legal entitlement to rights in the chattel paper, which is necessary for determining priority rankings among competing claims.

Other options do not directly impact the subordination of chattel paper security interests. For instance, registration of chattel paper is not a requirement for perfection or priority under the Uniform Commercial Code (UCC); rather, a properly executed security agreement and the necessary steps to perfect the interest are what matter. The type of financing arrangement (like a loan agreement) or its relation to a commercial lease does not dictate the subordination of interests as clearly