For almost 50 years, Douglas Chrismas has helmed his Los Angeles-based Ace Gallery, helping to put struggling artists on the map, while also organizing shows for famed artists such as Andy Warhol. But on April 6, 2016, Mr. Chrismas lost the keys to his storied gallery, after failing to make a $17 million court-ordered payment to settle debts in his 2013 bankruptcy case. The bankruptcy trustee will now control the reorganized business’ finances, with Mr. Chrismas continuing to oversee the curatorial and sales duties in an effort to satisfy creditors. But monetary creditors are proving the least of Mr. Chrismas’ worries, as artists are clamoring for the return of their works.

While galleries may own some of the pieces they display, they also display many that they hold on consignment. Consignment is a common industry practice, wherein an artist delivers a work to a gallery for the gallery to market and sell. Ownership of the work remains with the artist and no money changes hands until the work sells. Effectively, the gallery becomes the agent of the artist, working to sell the piece on behalf of the artist (for a commission, of course). In states such as California and New York, the law specifically creates a trust in which the works—and the proceeds therefrom—are held for the benefit of the artist. Other states, such as Texas, simply exempt consigned works—and the proceeds therefrom—from creditors of the gallery.

In the case of Ace Gallery, however, no records exist to confirm which works are consigned and which are owned by the gallery. Mr. Chrismas initially estimated the gallery’s collection to be 750 works; however, the bankruptcy trustee has since inventoried the collection and found it to include approximately 2,750 works, an eye-catching number by industry standards. The lack of records could prove problematic for both consignor artists and creditors as the former seek the return of their works and the latter seek to liquidate the gallery’s assets. While some artists filed claims in the gallery’s bankruptcy proceeding, others are poised to demand their works’ return from the trustee directly, as he tries to create a proper inventory tracking system.

With the help of art-management software, galleries should easily be able to track ownership, location, and sales of the works in their custody. However, artists should keep in mind that no system is error-proof and some galleries may employ outdated inventory systems. Reviewing the financial health of a gallery—as well as the inventory system it uses—before consignment and maintaining meticulous records after consignment will ensure that artists reap the maximum benefit from a consignment transaction.