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9 min read

Consignment Agreements vs. Retail Bankruptcy: UCC Advantages

Kristin Alford May 4, 2026

UCC Article 9 Consignment Filing UCC Financing Statements Bankruptcy
Consignment Agreements vs. Retail Bankruptcy: UCC Advantages

Are Your Consigned Goods Protected in a Retail Bankruptcy?

Picture this: a retail partner you have supplied to for years files for Chapter 11. You have a signed consignment agreement, a long relationship, and a clear understanding that the goods on their floor belong to you. Then the bankruptcy trustee tells you otherwise.

This is not a hypothetical. It is exactly what vendors experienced when Saks Global, Big Lots, Party City, and dozens of other retailers filed for bankruptcy in recent years. Consignors who believed their agreements were enough found themselves at the back of the creditor line, watching goods they owned get absorbed into a bankruptcy estate they had no claim against.

The Step Protected Consignors Took

The difference between the consignors who recovered their position and those who did not often came down to a single step: whether they had filed a UCC-1 Financing Statement before the goods ever left their warehouse.

For many consignors, the honest answer to the question above is: not as protected as you think. And the retail environment right now makes that a problem worth solving today, not later.

 

Retail Bankruptcies Are Not Slowing Down

The numbers tell a sobering story. According to S&P Global Market Intelligence, U.S. corporate bankruptcy filings reached a 14-year high in 2024, with 694 public and private companies filing for bankruptcy. The consumer discretionary sector (which includes retail) accounted for nearly 16% of those filings. That trend continued into 2025, with corporate filings surpassing 717 cases in the first eleven months of the year alone, the highest level since 2010.

Retail store closures have tracked alongside those filings. According to Coresight Research, 7,327 retail stores closed in 2024, nearly 58% more than in 2023. Forecasts suggested total store closures would approach 15,000 locations in 2025, far exceeding new store openings.

The names behind those closures are ones many businesses know well: Big Lots, Party City, Joann Fabrics, Rite Aid, and most recently, Saks Global (the parent company of Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman), which filed for Chapter 11 bankruptcy protection in January 2026.

These are not fringe operators. They are major retail partners that vendors trusted and supplied, in many cases on consignment. When these companies filed for bankruptcy, their consignors were left facing the same difficult question: Where do I stand? 

 

The Risk Consignors Face Without a UCC

When a retailer files for bankruptcy, an automatic stay goes into effect. The inventory on hand is gathered and treated as property of the bankruptcy estate. Secured creditors are paid first. Unsecured creditors receive whatever is left, which is often pennies on the dollar, if anything at all.

Consignment Agreement vs UCC Filing

Here is where consignors often discover a costly misunderstanding: owning the goods is not the same as being secured. A consignment agreement, on its own, is generally viewed by courts as a "secret lien," meaning it is an arrangement that the consignor and consignee know about, but the rest of the world does not. (For a deeper look at how selling on consignment and UCC filings interact, see our foundational overview.) Without a public record establishing your ownership and security interest, your goods are likely to become part of the debtor's estate.

The Saks Global bankruptcy brings this issue into sharp focus. Vendors who supplied goods on consignment without a properly filed and perfected UCC may find themselves treated as unsecured creditors, behind lenders and other secured parties with recorded interests. Chanel and Kering were listed among the top unsecured creditors, owed an estimated $136 million and $60 million respectively. Even luxury brands with longstanding relationships were left holding unsecured claims.

UCC Filings: What Actually Protects Consignors

The lesson is not subtle: it does not matter how long you have been doing business with a retailer, how trusted the relationship is, or how clearly your consignment agreement states that title remains with you. Without a perfected UCC filing, you are at the back of the line.

 

Does UCC Article 9 Apply to Consignment?

Under Article 9 of the Uniform Commercial Code, consignment is defined as "a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale." This definition is broad by design, and it means that most commercial consignment arrangements fall within the scope of Article 9.

What is the Article 2 Sale of Goods?

It is worth noting that some consignment transactions can also fall under Article 2, which governs the sale of goods. The distinction between Article 2 and Article 9 treatment can depend on how a transaction is structured and how a court may characterize it. At NCS Credit, our focus is on Article 9, because Article 9 is where the protection lives. It is the framework that gives consignors the ability to establish a perfected security interest, publicly record that interest, and assert priority over other creditors when things go wrong.

What is the difference between UCC and PMSI?

It is important to note that a consignment filing and a Purchase Money Security Interest (PMSI) are not the same thing. A PMSI arises when a seller or lender provides financing specifically to enable a debtor to acquire collateral; for example, a supplier who sells goods on credit and retains a security interest in those specific goods until paid. A consignment is a distinct transaction type, one in which the consignor retains title to the goods throughout the arrangement and the merchant sells on the consignor's behalf.

How Consignment Transactions Align with PMSI

Where the two intersect is in how Article 9 governs them. Under Section 9-103(d) of the UCC, a consignor's security interest in consigned goods is treated as if it were a PMSI in inventory for purposes of perfection and priority. This means the rules that apply to perfecting a PMSI in inventory (filing before delivery, conducting a UCC search, and sending authenticated notification letters to prior secured creditors) apply equally to consignment transactions. The consignment filing is its own filing type, but it follows the same framework.

For businesses already familiar with PMSI filings, this parallel is a useful reference point. The key distinction to keep in mind is that a consignment filing is not a PMSI. It is a separate transaction type that Article 9 governs using the same perfection model. 

 

How to Perfect a Security Interest in Consigned Goods

Filing a UCC on a consignment transaction is not optional if you want to be protected. It is the mechanism by which your ownership becomes legally enforceable against third parties, including a bankruptcy trustee.

To comply with Article 9 and properly perfect a consignment security interest, consignors should take the following steps:

  1. Execute a written consignment agreement. The agreement should be signed by both the consignor and the consignee. It should include the terms and conditions of the arrangement, a granting clause that establishes the security interest, and a detailed description of the consigned goods. The agreement should clearly state that title to the goods remains with the consignor until the goods are sold.
  2. File a UCC-1 Financing Statement. The UCC-1 must be filed in the state where the consignee is organized. The collateral description should accurately identify the consigned goods. Filing establishes public notice of your security interest.
  3. Conduct a UCC search and send authenticated notification letters. Before releasing goods, search for existing UCC filings against the consignee. Any prior secured creditors with a blanket lien in the consignee's inventory must be notified of your security interest in the consigned goods. This notification is a required step under Article 9 and must be completed before you deliver the goods.
  4. Complete all steps before delivery. This is critical. Any goods delivered prior to the perfection of your security interest may not be protected from prior secured creditors. If you deliver first and file later, you may find that your security interest does not cover goods already in the consignee's possession.
  5. Monitor and continue your filings. A UCC-1 Financing Statement is effective for five years from the date of filing. If you are in an ongoing consignment relationship, you must file a UCC-3 Continuation before the five-year lapse date to maintain your priority position. A lapsed filing is treated as if it never existed.

 

A Consignment Agreement Alone Is Not Enough

This is a point that cannot be made firmly enough. Time and again, consignors learn the hard way that a signed consignment agreement does not protect them in a bankruptcy proceeding. Courts have held that without a properly recorded and perfected UCC filing, a consignor's claim to goods held by a bankrupt retailer is subordinate to the claims of secured lenders.

One attorney who represents jewelry companies in the Saks bankruptcy described the situation plainly in trade press filing a UCC on a consignment arrangement is not expensive. It is a straightforward step that establishes your security interest in the public record. Without it, you have no proof of the consignment that courts and trustees will recognize ahead of other creditors.

The sentiment is one we have echoed at NCS Credit for years. A consignment agreement tells your customer that the goods are yours. A UCC filing tells everyone else.

 

The Cost of Not Filing Is Far Greater Than the Cost of Filing

For businesses that supply on consignment, the math is straightforward. Filing a UCC-1 is a relatively modest investment of time and resources. Losing an entire shipment of consigned goods to a bankruptcy estate because you did not file is not.

When retail partners are under financial pressure, the warning signs are often visible in advance: delayed payments, requests for extended terms, reduced orders, or public reports of credit downgrades and restructuring discussions. In the case of Saks Global, vendors were reportedly struggling to collect on invoices months before the Chapter 11 filing. Those who had perfected security interests through filed UCCs were in a materially different position than those who had not.

The broader retail environment makes this kind of proactive protection especially important right now. With commercial bankruptcies continuing to climb and retail closures accelerating, there is no guarantee that even well-established retail partners will remain financially stable. Consignors who rely on the assumption that their customers will not fail are taking a risk that does not need to be taken.

 

Protect Your Consigned Goods Before Shipping 

If you are reading this and you supply goods on consignment, ask yourself one question: do you have a perfected UCC filing on file for every active consignment arrangement you have right now?

If the answer is no, or if you are not sure, that is the gap that needs to close before your next shipment goes out the door. Not after a late payment. Not after a restructuring announcement. Before delivery.

The retailers who filed for bankruptcy in recent years did not send advance notice. Their vendors found out the same way everyone else did. The consignors who were protected had taken care of the paperwork long before things went wrong. The ones who hadn’t were left to file unsecured claims and hope for the best. 

 

How NCS Credit Supports Consignment Transactions

NCS Credit helps businesses complete every step of the UCC filing process for consignment transactions, from drafting collateral descriptions and filing UCC-1 Financing Statements to conducting UCC searches, preparing authenticated notification letters, and managing continuation filings before lapse dates. If you are not sure where your filings stand, we can help you find out. We work with consignors across a range of industries (from retail to foodservice) where the risk of an unperfected consignment is just as real.

Do not wait for a bankruptcy notice to answer that question for you. Contact NCS Credit today.

 

Consignment Agreements & Retail Bankruptcy FAQs

 

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