An
escrow agreement in which
unsecured creditors force a business to give proceeds from
sales of a large amount of
inventory and certain other
assets to a third party, known as the
escrow agent. The escrow agent holds the proceeds until the sales are final and then gives them to the creditors. If a business has acquired too much
debt in its
activities, a bulk sales escrow is introduced to ensure that the business does not spend the money it receives on still more bad ventures. This protects creditors who do not have
liens on specific assets. As with all escrow agreements, the escrow agent receives a
fee for his/her
services, which are usually split between the business and its creditors.