"Mortgage of personal property" means a transaction in which mortgage rights over the personal property that secures a claim are created in favor of the mortgagee without transfer of possession of the property by the debtor or a third party, such that if the debtor fails to perform the contract, the mortgagee may take possession of the mortgaged property and may sell the property, and satisfaction of the mortgagee's claims from the sale proceeds shall have precedence over other claims.

A personal property mortgage contract shall specify the following matters:
1. The names of the individuals or entities who are parties to the contract and their domiciles, residences, or places of business.
2. The amount of the claim being secured and the interest rate.
3. The name and quantity of the mortgaged property; the description of the specific serial number, identifying mark, or specification of the property, if there is any.
4. The manner of the debtor's or third party's possession of the mortgaged property and its location.
5. The means of exercise of mortgage rights and creditor's rights by the mortgagee in the event of the debtor's non-performance of his obligations under the contract.
6. A statement that the beneficiary of the insurance shall be the mortgagee if there is insurance,.
7. The date of entering into the mortgage contract.
When the claim that is secured by a personal property mortgage contract is a claim or claims incurred during a specific period of time, the mortgage contract shall specify the maximum amount of the claim secured.

When a debtor fails to perform the contract or the mortgaged property is relocated, sold, pledged, transferred, or otherwise disposed so as to prejudice the exercise of mortgage rights, the mortgagee may take possession of the mortgaged property.
When the debtor or third person of the preceding paragraph refuses to deliver the mortgaged property, the mortgagee may petition a court for provisional attachment. If the registered contract stipulates outright compulsory execution, the mortgagee may petition the court for compulsory execution pursuant to the contract.
When a third party has made a bona fide acquisition of the mortgaged property for consideration and the mortgagee subsequently takes possession of the mortgaged property from the third party, the third party then may claim damages from the debtor or the payee of the consideration.

A mortgagee that takes possession of mortgaged property in accordance with paragraph 1 of the preceding article shall give three days advance notice to the debtor or third party.
The notice of the preceding paragraph shall specify the reasons for taking possession of the mortgaged property, and may designate a deadline for contract performance. If the debtor has still failed to perform the contract by the deadline, the mortgagee may sell the mortgaged property in his possession and the debtor may not claim redemption of the mortgaged property thereafter.
When a mortgagee directly takes possession of the mortgaged property without giving the advance notice required by paragraph 1, then a debtor or a third party that performs the contract within a period of 10 days after the creditor takes possession, and bears the expenses incurred in taking possession, may redeem the mortgaged property; however, if there is a concern of perishment of the mortgaged property, significant depreciation in its value to the detriment of the rights of the mortgagee, or if the costs of its custody are prohibitive, the mortgagee may sell the property immediately after taking possession.

Except under the circumstances in the paragraph 3 proviso of the preceding article, when a mortgagee sells the property in his possession, then within 30 days after taking possession, and following a period of not less than 5 days of public notice, the mortgagee shall conduct an on-site public auction of the mortgaged property, and shall notify the debtor or third party 10 days prior to the auction.
If the mortgaged property is severable, auction of the property shall cease when the proceeds of the sale are sufficient for satisfaction of the debt and related expenses. The creditor himself or his family members may participate in the auction and buy the mortgaged property.

The proceeds from the sale of mortgaged property shall first be used to offset expenses, followed by payment of interest and then by payment of the principal. If there is an excess, it shall be returned to the debtor; if there is a deficiency, the mortgagee may continue to demand full payment of the debt.

The sale or auction of mortgaged property by a mortgagee pursuant to Articles 15, 18, or 19 shall be carried out under, in addition to the procedures set out in this Act,, Article 28 of the Enforcement Act of the Part of Obligations of the Civil Code.

When a mortgagee takes possession of or sells a mortgaged property other than in the manner prescribed in Articles 18, 19, and 21, the debtor may claim damages.

Any contractual stipulation providing that ownership of the mortgaged property shall be transferred immediately to the mortgagee upon failure to satisfy the claim at its maturity shall be void.

Mortgage rights on personal property may not be the subject of a pledge.

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