What gives a purchaser of chattel paper in good faith priority over a security interest?

A purchaser of chattel paper in good faith obtains priority over a security interest due primarily to the combination of being in possession of the chattel paper and acting in good faith. The Uniform Commercial Code recognizes that chattel paper consists of a writing that evidences both a monetary obligation and a security interest in specific goods, making it a valuable asset.

When the purchaser holds the chattel paper, they gain a level of protection that allows them to assert their claim to the rights embodied in that paper. Acting in good faith means that they are purchasing without knowledge of any claims that might be asserted by the holder of a prior security interest. This principle safeguards the integrity of transactions involving chattel paper, encouraging trade and commerce.

The other choices do not provide the same kind of legal protection or priority. Negotiating the chattel paper to a third party does not grant a direct priority in the presence of existing security interests, especially if the third party is not also acting in good faith. Having a higher monetary investment does not automatically confer priority under the UCC, as priority is often determined by possession and good faith. Filing for bankruptcy prior to the establishment of a lien does not directly relate to the right of a purchaser of chattel paper to claim priority, as