YOU AND THE LAW

By Joel Hecker

Get Your Money From Bankruptcy Proceedings

Advance Notes: Photo researchers and photographers often bill intermediaries instead of clients directly. Such intermediaries could be advertising agencies, production companies, or even representatives or agents. On occasion the client will have paid the intermediary who then files for bankruptcy, leaving the researcher or photographer without payment and often without recourse.

When a company files for bankruptcy, as you probably know, attempts to collect outstanding amounts must be handled through the Bankruptcy Court. Any other collection efforts, including separate litigation, must cease (or technically be "stayed") pending the outcome of the bankruptcy proceeding. If you are an unsecured creditor you will usually receive far less than your claim, if you receive anything at all, and it may take years before any money is paid.

Photo researchers and photographers often bill intermediaries instead of clients directly. Such intermediaries could be advertising agencies, production companies, or even representatives or agents. On occasion the client will have paid the intermediary who then files for bankruptcy, leaving the researcher or photographer without payment and often without recourse.

I have been successful in obtaining payment of funds due in these situations by insisting, when the contract is made, that all funds due to the photoresearcher or photographer (less any commissions or other monies that would be paid to the intermediary) were never meant to belong to the intermediary and are thus to be treated as fiduciary funds, obtained solely on behalf of the researcher or photographer.

The theory behind this is that these funds do not belong, and never belonged, to the bankruptcy estate and therefore are not subject to the normal rules regarding creditors and debtors. You, of course, may have difficulty convincing the intermediary that the funds should be held in a fiduciary capacity. In that event, your paperwork should include words to such effect even if it does not actually appear in the agreement itself. Given the potential likelihood of a pending bankruptcy in any given situation and the dire consequences resulting from it, it is certainly worth the attempt to protect yourself in this regard.

Attorney Joel L. Hecker lectures and writes extensively on issues of concern to the photography industry. His office is located at Russo & Burke, 600 Third Ave, New York NY 10016. Phone: 1 212 557-9600. E-mail: Heckeresq@aol.com.