Legal Question in Bankruptcy in Iowa

Bankrupt distributor

We are a equipment manufacturer and sell our products via authorized distributors in each State. Our written terms indicate that we retain full ownership of the equipment unit fully paid (and our normal terms are 30-days Net). One of our distributors went ''out-of-business'', and owes us $50,000 for a x-ray unit. The distributor sold the unit to a local hospital in Iowa about 2 months ago and was recently paid (before they closed their doors). Can you tell me if we have the rights to re-possess the equipment from the end user, even though they might have paid the distributor? What steps should we take at this point? (the distibutor has not announced that they have gone bankrupt, but they have turned off phones and e-mail, with no communications available).

Thank you, Scott


Asked on 2/24/09, 10:09 am

1 Answer from Attorneys
jeffrey lazroe Jeffrey A. Lazroe attorney at law

Re: Bankrupt distributor

This is an interesting question. Your real gripe is with the authorized distributor, but collecting from him is a problem.

Your contract is similar to delivery by consignment - when the property is sold but not monies are paid.

Title never transfered to the authorized distributor, so technically title is with you so repossession could be considered an option.

I would suggest that you take immediate legal action as the first creditor is likely to be paid first.

Also, action can be initiated against the local hospital in Iowa for the return of the chattel or monies. They in turn would bring pressure against the authorized distributor who would then be squeezed in the middle.

I would have to see the contract between you and the authorized distributor to give you further advice.

Feel free to contact me if you have further questions.

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Answered on 2/25/09, 10:35 am


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