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Barbara M. Goodstein

In a typical consignment, a seller (the consignor) delivers goods to an intermediary or middleman (the consignee) which holds those goods for sale to a third party. The goods can be sold to the consignee, or they can be held by the consignee subject to sale (a bailment), in either case pursuant to an arrangement in which the consignee shares with the consignor, in whole or in part, the proceeds of the sale of those goods to the third party. Consignment sales can be a major part of a retailer’s or distributor’s business plan. However, goods in the possession of a bankrupt consignee can become property of its bankruptcy estate even if the property hasn’t been sold to the consignee. Unfortunately, oftentimes this fact doesn’t become apparent to creditors of a retailer or distributor until it files for bankruptcy protection.

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