What if the Auction House goes belly-up?

[Chaplin]

The rule Jamo described generally applies to other goods as well. The whole trick is making sure the funds are not treated as assets of the bankrupt's estate. This is done by demonstrating the the bankrupt did not have legal or equitable title to the funds in question and can be accomplished in a number of ways. Obviously, an express trust or escrow agreement is the best way to do this, but if you don't have one of these, you're not totally screwed, you just have an uphill battle. For instance, a creditor might be able to establish the existence of an equitable or constructive trust. Another argument a creditor could make in that unfortunate circumstance is that the auction house is acting as a "mere conduit" between buyer and seller, and thus, the bankrupt never had a legal right to such funds, and therefore such funds should not be considered assets of the bankrupt's estate. Of course, none of this is any good if the bankrupt has already spent the creditor's money and there is no $$ left. In that circumstance, the creditor may in fact be screwed . To avoid these problems, best bet is to have an express trust or escrow agreement. That's my .02