Protection for the Prepaying Purchaser
1.19.2005
What if the Seller Goes Broke?
When the typical consumer or business person buys a product from a store or supplier in a cash or credit transaction, he or she does not stop to think about whether it may be subject to a security interest. That rarely causes a problem because the law generally protects a buyer who pays for goods at or after delivery. However, where the buyer prepays, the seller's bankruptcy prior to delivery can cost the buyer its prepayment and leave it with no right to the goods.
