Posted By:
boxingcardman1. Under the Uniform Commercial Code, while consigned goods may be seized to pay the consignee's debts (making the consignor an unsecured creditor), one of the exceptions is when the consignee is generally known to be in the consignment sales business (like any auctioneer). The consignor is allowed to go into court and prove its title to the goods and get them back. If you are concerned, however, you would need to file a UCC-1 financing statement for maximum protection. Once the UCC-1 is properly filed, the consignor will hold a priority security interest with the same priority as a purchase-money secured creditor.
2. Most states have enacted laws that protect consignors from having their stuff taken and sold by the consignee's creditors in a variety of consignment circumstances. Depends on where the auctioneer is located.
3. The U.S. Bankruptcy Court for the District of Delaware recently held that consigned goods may not be sold to pay debts of the bankrupt absent evidence proving that such goods constitute property of the estate. In re Whitehall Jewelers Holdings, Inc., 2008 WL 2951974 (Bankr. D. Del. Jul. 28, 2008).
Sic Gorgiamus Allos Subjectatos Nunc