When Is the Factoring of Accounts a True Sale?

The Dryden Advisory Group LLC decision from the US Bankruptcy Court for the Middle District of Pennsylvania addresses the recurrent question of whether a factoring of accounts constitutes a true sale of the accounts or constitutes a secured transaction. The significance of the distinction is not whe...

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Bibliographic Details
Published inAmerican Bankruptcy Institute journal Vol. 34; no. 12; p. 38
Main Author Gadsden, James
Format Journal Article
LanguageEnglish
Published Alexandria American Bankruptcy Institute 01.12.2015
Subjects
Accounts receivable
Agreements
Bankruptcy
Collateral
Factoring
Federal court decisions
Federal courts
Fees & charges
Intangible assets
Jurisdiction
State court decisions
State laws
Uniform Commercial Code-US
United States > US
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Summary:The Dryden Advisory Group LLC decision from the US Bankruptcy Court for the Middle District of Pennsylvania addresses the recurrent question of whether a factoring of accounts constitutes a true sale of the accounts or constitutes a secured transaction. The significance of the distinction is not whether the transaction is subject to Article 9 of the Uniform Commercial Code, since Article 9 applies to sales of accounts as well as loans secured by accounts, but whether the factored accounts are property of the estate and thus within the jurisdiction of a bankruptcy court. Having concluded that, on balance, the amended factoring agreement was more properly characterized as a true sale, the court held that the accounts purchased by the seller prior to the filing of the bankruptcy petition were not property of the estate and that the court lacked jurisdiction to determine the relative interests of the factor and seller's other creditors in the accounts.
ISSN:1931-7522