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Assignments for the Benefits of Creditors - "ABC's" - The Basics in California

An assignment for the benefit of creditors (“ABC”) is a contract by which an economically troubled entity ("Assignor") transfers legal and equitable title, as well as custody and control, of its assets and property to an independent third party ("Assignee") in trust, who is required to apply the proceeds of sale of the property to the assignor's creditors in accord with priorities established by law.

ABCs are a well-established common law tool and alternative to formal bankruptcy proceedings. The method only makes sense if there are significant assets to liquidate. ABCs are most successful when the Assignor, Assignee and creditors cooperate but can be imposed even if the creditors are not supportive.

Assignors - Rights and Duties

Generally, any debtor – an individual, partnership, corporation or LLC - may make an assignment for the benefit of creditors. Individuals seldom utilize ABCs, though, because there is no discharge of all debts as there would normally occur in a completed bankruptcy filing. Thus, the protection and benefit of the process is quite limited for any personal obligor.

ABCs can benefit individual principals who have personally guaranteed company obligations or have personal liability on tax claims. Once the Assignment Agreement has been executed, a trust is automatically put in place over the assets transferred. The Assignor can neither rescind the contract nor control the proceedings, but the Assignor may be consulted as necessary and appropriate by the Assignee during the liquidation process.

Assets to be Assigned

Assignor may assign any non-exempt real, personal, and/or general intangible property that can be sold or conveyed. Note that such assets as intellectual property, trade names, logos, etc. may be so transferred and sold. When a corporation makes an assignment, all corporate property, tangible and intangible is transferred including accounts, and rights and credits of all kinds, both in law and equity. The assets only can be sold, not the corporation or its stock. Thus the corporation remains existing, albeit without any significant assets left. It becomes, effectively, a shell.

Assets are typically sold without representations or warranties. The sale is free and clear of known liens, claims and encumbrances - with the consent or full payoff of lien holders. Generally, Assignee warrants only that Assignee has title to the assets.

Assignees - Rights and Duties

The Assignee is generally an unrelated professional liquidator selected by the Assignor. The Assignee gathers the Assignor’s assets and sells the Assignor’s right, title and interest in those assets, then distributes the proceeds to Creditors in accordance with statutory priorities.

The Assignee has a fiduciary duty to the Creditors. Assignee’s duties include protecting the assets of the estate, administering them fairly and representing the estate. Assignee is free to enter into contracts to recover assets or liquidated claims, e.g. filing suit or taking other action.

The Assignee may be removed by a court for violations of the Assignment contract or nonfeasance (failure to act appropriately). The Assignee may not give up his/her/its duties without liability or a superior court order until creditors receive distribution of the proceeds of sale of the assets transferred.

Assignee usually prepares the Assignment documents, though the attorney for the Assignor may draft them as well. Often the terms are negotiated at length.

Preferential Claims and Avoidance

Assignee has statutory avoidance powers, similar to those granted to a Chapter 7 bankruptcy trustee. [See Calif. CCP § 493.030 (termination of lien of attachment or temporary protective order), § 1800 et seq. (avoidance of preferential transfers); Calif. Civ.C. § 3439 et seq. (avoidance of fraudulent conveyances)]

Even so, courts may question this right outside a bankruptcy proceeding. There is also disagreement between the Federal Court (Ninth Circuit) and California state courts whether the Bankruptcy Code preempts the assignee's preference avoidance power under California statutory law.

Creditors - Rights and Duties

While not required to consent to an Assignment, secured creditors often must agree in advance since their cooperation frequently affects the liquidation of the assets. Secured creditors are not barred from enforcing their security by such an assignment. The acceptance of an Assignment by unsecured creditors is not necessary, since under common law the proceedings are deemed to benefit them through equality of treatment.

Note that all Creditors must file their claims within the statutory 150-180 day claim filing period.

ABCs in California do not require a public court filing, but most corporations require both board and shareholder approval. Costs and expenses, including the assignee’s fees, legal expenses and costs of administration, are paid first, just as in a Chapter 7 bankruptcy . Because an assignee’s fee is often based on a percentage value of the assigned assets, it can be difficult to procure assignees for smaller estates.

  • Assignment Agreement is executed and ratified. Assignor turns over and assigns to Assignee all right, title and interest in the assets being assigned.
  • Assignor gives Assignee a complete, certified list of creditors, including addresses and amounts owed.
  • Assignee notifies Creditors within 30 days of execution that assignment has been made, provides an estimate of the probable distribution, and provides a claim form for each Creditor to file a claim in the Assignment estate.
  • Creditors have 150-180 days from the date of written notice of the assignment to file their claims.
  • After claim forms are returned and/or the Bar Date has passed, Assignee reconciles the claims and/or objects to any improper claim amounts.
  • After liquidation, Assignee determines distribution amounts. Claim priority is determined first by state statute, then by Bankruptcy Code. First are secured creditors, then follow tax & wage claims.
  • Assignee generally informs the IRS that assignment has been made and files notice with local Recorder.
  • Assignee immediately searches for any previously undisclosed liens (UCC or real estate) to ensure complete notice to all creditors and interest holders.
  • Assignee secures all assets. In limited situations where the business has enough cash, Assignee may continue to operate the business to maintain going-concern value - if no further debt will be incurred.

It normally takes about 12 months to conclude an ABC.

Effects of ABC

An ABC generally is faster and less costly than a bankruptcy proceeding. Parties can often agree and determine what is going to happen prior to execution of the assignment.

However, ABCs do not discharge individual Assignors from their debts, and do not provide for the reorganization of the business. There is no automatic stay, though in practice an ABC results in an informal and/or incomplete automatic stay if the creditors determine that the assets are beyond their reach.

Creditors are able to continue to pursue the Assignor. ABCs often block judgment creditors from attaching assets because the Assignor no longer has title to or interest in the assigned assets. Sometimes the Assignee is willing to allow the judgment if the judgment creditor submits its claim as described above. The assignee may also defend against a claim if the plaintiff is seeking a judgment which is unjustified and not fair to other creditors.

An ABC also provides grounds for filing an involuntary bankruptcy petition within 120 days of assignment.

The Statutes: California Code of Civil Procedure

§§493.010-493.060 “Effect of Bankruptcy Proceedings and General Assignments for the Benefit of Creditors”

§§1800-1802 “Recovery of Preferences and Exempt Property in an Assignment for the Benefit of Creditors”

A Chapter 11 Reorganization can cost hundreds of thousands of dollars and even a business Chapter 7 Liquidation bankruptcy can easily cost tens of thousands or more. The Assignment method, which pays the Assignee normally by a percentage of the assets sold, is cost-efficient but limited in the protection it may afford the Assignor, as described above. Before this method is attempted, competent legal counsel and certified public accountants should be consulted.

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assignment for benefit of creditors

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Assignment for the benefit of the creditors (ABC)(also known as general assignment for the benefit of the creditors) is a voluntary alternative to formal bankruptcy proceedings that transfers all of the assets from a debtor to a trust for liquidating and distributing its assets. The trustee will manage the assets to pay off debt to creditors, and if any assets are left over, they will be transferred back to the debtor. 

ABC can provide many benefits to an insolvent business in lieu of bankruptcy . First, unlike in bankruptcy proceedings, the business can choose the trustee overseeing the process who might know the specifics of the business better than an appointed trustee. Second, bankruptcy proceedings can take much more time, involve more steps, and further restrict how the business is liquidated compared to an ABC which avoids judicial oversight. Thirdly, dissolving or transferring a company through an ABC often avoids the negative publicity that bankruptcy generates. Lastly, a company trying to purchase assets of a struggling company can avoid liability to unsecured creditors of the failing company. This is important because most other options would expose the acquiring business to all the debt of the struggling business. 

ABC has risen in popularity since the early 2000s, but it varies based on the state. California embraces ABC with common law oversight while many states use stricter statutory ABC structures such as Florida. Also, depending on the state’s corporate law and the company’s charter , the struggling business may be forced to get shareholder approval to use ABC which can be difficult in large corporations. 

[Last updated in June of 2021 by the Wex Definitions Team ]

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Pursuing Assignments for the Benefit of Creditors

  • Pursuing Assignments for the Benefit of Creditors
  • Pursuing Assignments for the Benefit of Creditors Overview
  • Bankruptcy and Restructuring
  • Security Agreements and UCC Filings in Bankruptcy
  • Acquiring Assets from Bankruptcy Estates and Distressed Borrowers
  • Workout, Refinancing, and Restructuring Opportunities Outside of Bankruptcy
  • Representing Creditors in Bankruptcy Court and Pre-Petition Negotiations
  • Debtor-in-Possession Financing and Cash Collateral
  • Preventing Debtor Bankruptcy Through Liquidation, Restructuring, and Reorganization
  • Proofs of Claim
  • Estate Disputes Over the Treatment of Differing Creditor Claims, Transfer Avoidance, Breach of Fiduciary Duty, and Alter Ego Liability
  • Reconciling Creditors Committee Interests to Avoid Litigation and Expedite Recovery
  • Litigating Parasitic State Court Claims on Behalf of the Estate
  • Adversary Proceedings to Set Aside Preference Payments and Fraudulent Transfers
  • Creditors’ Committees and Trustees
  • Defending Against Involuntary Bankruptcy Petitions
  • Advising Insolvent Companies on Fiduciary Duties and Winding Down
  • Establishing a Restructuring Agenda
  • Recovering from Non-Debtor Entities
  • Filing Involuntary Bankruptcy Petitions
  • Foreclosure or Repossession During Bankruptcy
  • The Impact of Commercial Reorganization on Creditors
  • Assigning Bankruptcy Claims to Claims Traders
  • Trade Supplier Relations with Financially Distressed Customers
  • Creditor’s Committees and Trustees
  • Adversary Proceedings in Bankruptcy
  • Relief from the Automatic Stay
  • Bankruptcy Defense: Fraudulent Transfers and Preferential Payments

What are assignments for the benefit of creditors?

Assignments for the benefit of creditors (ABCs) are an alternative to formal bankruptcy proceedings. Under Florida law, an ABC is a voluntary, out-of-court process where a debtor transfers their assets to an assignee, who then liquidates these assets and distributes the proceeds to the debtor’s creditors.

For example, a struggling business in Florida may pursue an ABC instead of filing for bankruptcy. This choice can be advantageous because it is often faster, less expensive, and less public than a formal bankruptcy filing. The business would transfer its assets to an assignee responsible for selling these assets and distributing the proceeds to the creditors following the priorities established by Florida law.

Need a bankruptcy law advocate? Schedule your consultation today with a top bankruptcy and restructuring attorney.

Which Florida laws and regulations apply to assignments for the benefit of creditors?

The primary source of law governing ABCs in Florida is Chapter 727 of the Florida Statutes . This chapter outlines the process for initiating an ABC, the assignee’s role, and the creditors’ rights. Additionally, the Florida Rules of Civil Procedure may apply to certain aspects of an ABC, such as serving notice to creditors and managing creditor claims.

Federal laws, such as the Bankruptcy Code , generally do not apply to ABCs because they are state law alternatives to bankruptcy. However, it is essential to note that federal laws may still impact an ABC in certain situations, such as when a debtor’s assets are subject to federal tax liens or other federal claims. In these cases, debtors must consult a knowledgeable attorney to navigate the interplay between state and federal laws.

How do assignments for the benefit of creditors connect to the bankruptcy process?

The connection between pursuing an ABC and bankruptcy legal services for debtors lies in their shared goal of providing relief to financially distressed individuals or businesses. Both processes involve the liquidation of assets and the distribution of proceeds to creditors. However, ABCs are generally less formal, less expensive, and more private than bankruptcy filings, making them an attractive option for debtors seeking to avoid the stigma and complexities associated with bankruptcy.

In an ABC, a debtor voluntarily transfers their assets to an assignee who liquidates them and distributes the proceeds to creditors. This process differs from a bankruptcy proceeding, where a court-appointed trustee oversees the operation. Furthermore, while strict federal rules and procedures bind bankruptcy cases, ABCs offer more flexibility, allowing parties to tailor the process to their needs.

When a set of facts is appropriate for bankruptcy services, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation or another form of specialized bankruptcy advocacy, please contact our office to set up your initial consultation.

What are the prerequisites for debtors to pursue assignments for the benefit of creditors?

Consider the following:

  • Voluntary action: The debtor must willingly initiate an ABC, as this process is a voluntary alternative to bankruptcy.
  • Valid assignment: The debtor must properly execute and deliver the assignment to a qualified assignee, who is often an attorney, accountant, or insolvency professional.
  • Recording the assignment: The assignee must record the assignment in the county’s public records containing the debtor’s principal place of business.
  • Filing notice: The assignee must file a notice of the assignment with the circuit court clerk in the county where the debtor recorded the assignment.
  • Notifying creditors: The assignee must provide written notice to all known creditors of the debtor within 20 days of the assignment, informing them about the ABC process and their rights.

By satisfying these requirements, the debtor can effectively pursue an ABC in Florida, which allows for a more personal and flexible approach to resolving financial difficulties compared to bankruptcy.

Please contact our office to set up your initial consultation to see what forms of legal protection and advocacy may be available for your unique situation.

Frequently Asked Questions

  • Can a debtor choose any person as an assignee for an ABC?

No, not just anyone can be an assignee. The assignee must be a disinterested person who is not an insider of the debtor and is qualified to manage the debtor’s assets and affairs. Assignees are typically professionals, such as attorneys, accountants, or insolvency experts.

  • Does an ABC in Florida prevent creditors from pursuing legal action against the debtor?

Unlike bankruptcy, an ABC does not automatically halt legal actions by creditors. However, creditors may agree to a standstill or moratorium on legal actions while the ABC process is ongoing. This outcome may depend on the specific circumstances and the willingness of the creditors to cooperate.

  • How does an ABC affect the debtor’s credit rating?

Although an ABC may be less public and stigmatizing than bankruptcy, it can still harm the debtor’s credit rating. Credit reporting agencies may treat an ABC as a similar event to a default, which can lower the debtor’s credit score and make it more difficult for them to obtain future credit or loans. However, the impact on the credit rating may vary depending on the specific circumstances of the case and the debtor’s credit history before the ABC. Therefore, debtors must work closely with financial advisors and credit counselors to rebuild their credit after an ABC process.

Have more questions about how bankruptcy services could positively impact your business operations and relationships?

Crucially, this overview of assignments for the benefit of creditors does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain tireless advocates at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation .

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United States: ABC: Assignments For The Benefit Of Creditors

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What's an ABC?  If you ask ChatGPT, “ABC” is an acronym that can have multiple meanings, depending on the context—for example, referring to the alphabet. But here we are talking about a type of business liquidation process in the United States known as an Assignment for the Benefit of Creditors (“ABC”). An ABC is governed by state law and has long been viewed as an alternative to a liquidation under Chapter 7 of the US Bankruptcy Code. Although the ABC process has existed for more than a century, it now has increased interest in certain market environments due to its speed, flexibility, and comparatively lower expense than a bankruptcy proceeding.

When Does an ABC Make Sense?  As a potential buyer, you want to assess potential legal risks if a target's liabilities exceed (or are reasonably expected to exceed) its assets. In such a situation, third parties may later seek to assert that the purchase price you paid for the assets of the target was below fair value and to unwind the transaction or impose continuing liability under successor liability and fraudulent conveyance theories, among others. Unlike a direct asset purchase in such circumstances, in an ABC it's less likely that individual creditors will bring claims against you on fraudulent transfer, successor liability, or other theories because the assets are purchased from an independent fiduciary through a legally recognized wind-down process rather than directly from the distressed company. As a company in distress, you may want to avoid the length and expense of the federal bankruptcy process.

The Basics.  The specifics of the ABC process vary by state, but it generally involves four main steps, as follows:

  • A company authorizes (through board and any necessary shareholder consent) the shutdown of its operations and assignment of all of its assets to a third-party assignee for the benefit of the company's creditors. The assignee, who is functionally similar to a bankruptcy trustee, is an independent fiduciary selected by the company and typically has experience in insolvency matters, the relevant industry, or both. In many states, such as California, Texas, and Illinois, the ABC process ordinarily is initiated and undertaken with little or no court involvement. Other states, such as Delaware and New York, provide for varying levels of court involvement with the ABC process, though generally substantially less than a bankruptcy proceeding. Once the ABC commences (which includes the appointment of the independent fiduciary), the company's board has no further role in the ABC process.
  • The assignee provides notice of the assignment to creditors and other parties in interest and requests submission of claims within a certain time. The time period in which notice must be given and claims must be filed varies by state and is based on specific statutory requirements (such as in California) or, in the absence of specific statutory requirements, may be based on local practice or custom (such as in Delaware and Illinois). 
  • The assignee liquidates the assets, seeking to maximize the value it obtains. In some cases, the assets are sold as a going concern shortly following commencement of the ABC, pursuant to definitive documentation that has been negotiated with the proposed buyer prior to commencement of the ABC. The liquidation may take other forms as well, such as by sale of certain key assets in bulk and sale of the remaining assets through auctions or other private or public methods. 
  • The assignee distributes the net proceeds of sale to the company's creditors in accordance with priorities under applicable law.

The Buyer's Perspective.  As a potential buyer, you may already be in discussions with the target company prior to the ABC process or you may become involved through the assignee. Although there are some similarities with a Section 363 sale (like a shorter period for due diligence and the potential to lose key personnel through the process), the ABC process differs in several notable respects from a bankruptcy proceeding: 

  • The commencement of an ABC does  not  (i) give rise to an automatic stay of collection or enforcement actions against the company or its property, (ii) prevent creditors from attempting to commence an involuntary bankruptcy case against the company, or (iii) invalidate contractual provisions allowing for counterparties to terminate or modify a contract. 
  • Unlike a sale conducted under Section 363 of the Bankruptcy Code, the assignee generally cannot sell assets “free and clear” of liens and security interests—if you are buying assets subject to a security interest, the secured party will need to be paid in full or agree to release its lien. Some states that provide for judicial approval of a sale, such as Florida and Minnesota, may provide some ability for an assignee to obtain relief similar to a “free and clear” sale order in an ABC process. 
  • Anti-assignment provisions in leases or contracts cannot be overridden. So, any consents required under contracts that the buyer wants to assume will need to be obtained. 

How We Can Help.  We have successfully navigated the ABC process for our clients in a variety of states and industries, including technology, finance, chemicals, and manufacturing and maximized the advantages that acquiring assets through an ABC can provide to buyers. Although sales are usually done on an “as-is, where-is” basis, with limited ability to obtain operational or asset-level representations and warranties and without any indemnity rights in favor of the buyer, we have advised buyers in transactions where additional rights have been obtained (without the use of representation and warranty insurance).

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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assignment for the benefit of creditors basics

assignment for the benefit of creditors basics

Assignment for the Benefit of Creditors

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  • Distressed M&A >

Our Business Restructuring, Creditors’ Rights & Bankruptcy practice group regularly advises clients in a broad range of industries nationally on issues relating to financial distress, insolvency and the exercise of associated rights and remedies. Our extensive experience and substantial knowledge of the law enables us to develop innovative business strategies and solutions for our clients’ most difficult challenges.

In connection with representations involving the sale of distressed businesses, we have advised each of the key stakeholders including buyers, sellers, sponsors, lenders, directors and officers. Our clients in distressed business transactions include public and private companies, private equity firms and financial institutions. We understand the complexities and sensitivities in these matters and recognize that each transaction has a different mix of risk, certainty, speed and expense. Our job is to understand our client’s needs, master the facts, develop an optimal strategy for accomplishing our client’s business objectives that anticipates all potential challenges and identifies solutions in advance, and efficiently execute the agreed upon strategy to successful completion.

Client feedback lauds our practice group as “five-star” for providing “a very high level of client service” and for going “above and beyond to assist the client.” We are also known for being “proactive and attentive. Always accessible. Creative and forward with advice.”

A representative sample of our completed ABC transactions include:

Health, Life Sciences & Wellness

  • Representing the assignee in the ABC for a life sciences company specializing in cancer treatment options.
  • Representing the assignee in the ABC for a provider of musculoskeletal wellness and soft tissue illness treatment and prevention solutions to employers.
  • Representing the assignee in the ABC for a manufacturer of radiation protective products for the health care, dental, veterinary and nuclear industries.

Technology & Software

  • Representing the assignee in the ABC for a developer of three-dimensional long-range facial recognition technology.
  • Representing an assignee in a motion technologies company’s ABC in the Delaware Court of Chancery.
  • Representing the assignee in the ABC for a developer of technology in the cable television industry.
  • Representing the assignee in the ABC for a developer of marker-less motion capture software and systems.

Manufacturing

  • Representing the assignee in the ABC for a developer of energy conversion systems for wind energy and industrial markets, including advising our client on liquidation of assets and distribution to creditors.
  • Representing three assignees in the ABC for the world’s largest privately held designer, manufacturer and marketer of winch systems.

Media, Entertainment & Leisure

  • Representing the senior lender in the ABC for a nationwide religious bookstore.
  • Representing the assignee in the ABC for a developer of interactive video games and digital content.
  • Representing the assignee in the ABC for a vacation rental distributor.
  • Representing the assignees in multiple ABCs involving a national trampoline park.

Consumer Products

  • Representing a special purpose entity in the ABC for an online grocery provider.
  • Representing the assignees in the ABCs for an online estate auction house.

Real Estate & Other Services

  • Representing the assignees in the ABCs for an office leasing company with 22 U.S. locations.
  • Representing a secured lender’s interest in an ABC involving a government contract-related dispute.
  • Representing the assignee in the ABC for a provider of advertising material.
  • Representing three assignees in the ABC for an SAS company.
  • Representing the assignee in the ABC for a provider of a mobile delivery network software development kit.
  • Representing the assignees in multiple ABCs for a software company based in Denver, Colorado.
  • Representing the assignee in the ABC for a software company based in Missoula, Montana.
  • Practical Law

Assignments for the Benefit of Creditors: Overview

Practical law practice note overview w-006-7771  (approx. 19 pages).

  • United States

Assignments for the Benefit of Creditors in New York | Practical Law

assignment for the benefit of creditors basics

Assignments for the Benefit of Creditors in New York

Practical law practice note w-018-2928  (approx. 19 pages).

Parsippany: (973) 538-4700

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Is an Assignment for the Benefit of Creditors like a Bankruptcy?

Is an Assignment for the Benefit of Creditors like a Bankruptcy?

At first, an assignment for the benefit of creditors (ABC) may seem similar to a bankruptcy claim. However, upon a deeper look, it is clear that an assignment for the benefit of creditors is different. Similar to liquidation proceedings in chapter 7 or chapter 11 bankruptcy proceedings, an ABC can be used by either an individual or a business if they are going through significant financial difficulties. In both cases, the struggling debtor sells off all its assets in order to pay back its outstanding debts to its creditors. This mechanism helps to maximize the return for creditors.

An assignment for the benefit of creditors is distinct from bankruptcy proceedings because it is a much less formal process governed by state law rather than federal law. The informal nature of these proceedings means that it is faster and easier to marshal a debtor’s assets, liquidate same, and distribute proceeds equitably to creditors under an assignment rather than under federal bankruptcy law. Furthermore, an ABC often requires less court involvement and provides more flexibility to the assignee to make liquidation decisions as required. This is generally beneficial for both creditors and debtors because it is faster, less expensive, and more private than traditionally afforded bankruptcy liquidations.

Understanding Assignment for the Benefit of Creditors in New Jersey

In New Jersey, an assignment for the benefit of creditors is governed by New Jersey statutes that codify the preexisting common law. The proceedings are voluntary processes whereby the debtor designates an assignee who is empowered to marshal and liquidate (sell) the assets of the debtor and then distribute the proceeds of the sale to the debtor’s creditors. The assignee must ensure that all of the financial liquidations are done for the benefit of the creditors and with the sole goal of repaying outstanding debts. This is significant because in New Jersey, the debtor can choose its assignee rather than relying on a court-appointed trustee in bankruptcy who may not understand the nuances of the debtor’s finances. The ability to choose the assignee can be beneficial because an assignee with an understanding of the debtor’s finances can expedite the liquidation process rather than spend valuable time learning the ropes.

An ABC in New Jersey is generally cheaper than filing formal bankruptcy proceedings because it is faster and usually requires less litigation. The expeditious nature cuts down on the debtor’s and creditor’s legal bills and other costs associated with ongoing litigation. Still, creditors should be counseled to make sure that the liquidation is being conducted properly, and that the assignee is obtaining a fair return on the sale of the assets to maximize the recovery of the debts owed to the creditors.

FSKS is on Your Side

At FSKS, our attorneys are experienced in both bankruptcy and assignments for the benefit of creditors in New Jersey. We have a strong track record of success in the area of creditor’s rights and pride ourselves on being one of the strongest and most successful Creditors’ Rights firms in New Jersey, New York, and Pennsylvania. We’re ready to give you trusted advice and help maximize your return.

If you require assistance with or have questions regarding an assignment for the benefit of creditors in New Jersey, please contact Vincent DiMaiolo, Jr. ( [email protected] ), Nicholas Canova ( [email protected] ), or Tammy L. Terrell-Benoza ( [email protected] ) at (973) 538-4700 .

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2014 New York Laws DCD - Debtor & Creditor Article 2 - (2 - 24) GENERAL ASSIGNMENTS FOR THE BENEFIT OF CREDITORS

  • 2 - Jurisdiction of proceedings.
  • 3 - Requisites of general assignment.
  • 4 - Debtor's schedule.
  • 5 - Notice to creditors to present claims.
  • 6 - Bond of assignee.
  • 7 - Further security.
  • 8 - Discharge or removal of assignee; correction of inventory or schedule; supplemental inventories or schedules.
  • 9 - Failure to file bond.
  • 10 - Action on bond; application of recovery.
  • 11 - Proceedings in case of death of assignee.
  • 12 - Notices to parties interested in the estate as creditors or otherwise.
  • 13 - Debts which may be proved against the estate.
  • 14 - Duties of assignee.
  • 15 - Power of court.
  • 16 - Examination of witnesses.
  • 17 - Invalid claims.
  • 18 - Effect of orders; power of judge and duties of clerk.
  • 19 - Sale and compromise of claims and property.
  • 20 - General powers of court.
  • 21 - Trial, costs and commissions.
  • 21-A - Company pension plans; deductions from wages trust moneys; preference.
  • 22 - Wages and commissions and preferred claims.
  • 23 - Limitation of preferences.
  • 24 - Appraisal of estate in the hands of assignee.

Disclaimer: These codes may not be the most recent version. New York may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.

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IMAGES

  1. Summary of Creditors' Claims

    assignment for the benefit of creditors basics

  2. Debtors & Creditors Reconciliation Statement.xls

    assignment for the benefit of creditors basics

  3. Assignment for the Benefit of Creditors (ABC)?

    assignment for the benefit of creditors basics

  4. General Form of Assignment to Benefit Creditors

    assignment for the benefit of creditors basics

  5. Fillable Online Assignment for the Benefit of Creditors

    assignment for the benefit of creditors basics

  6. Creditors Claim Form Florida

    assignment for the benefit of creditors basics

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COMMENTS

  1. Assignments for the Benefits of Creditors

    An assignment for the benefit of creditors ("ABC") is a contract by which an economically troubled entity ("Assignor") transfers legal and equitable title, as well as custody and control, of its assets and property to an independent third party ("Assignee") in trust, who is required to apply the proceeds of sale of the property to the assignor's...

  2. assignment for benefit of creditors

    Assignment for the benefit of the creditors (ABC) (also known as general assignment for the benefit of the creditors) is a voluntary alternative to formal bankruptcy proceedings that transfers all of the assets from a debtor to a trust for liquidating and distributing its assets.

  3. Assignment for the Benefit of Creditors: Effective Tool for Acquiring

    An assignment for the benefit of creditors (ABC) is a business liquidation device available to an insolvent debtor as an alternative to formal bankruptcy proceedings. In many instances, an ABC can be the most advantageous and graceful exit strategy.

  4. Assignment for Benefit of Creditors: Alternative to Business ...

    An ABC, as the name would suggest, is an assignment with the purpose of liquidating assets to benefit creditors by getting them paid. Need Professional Help? Talk to a Business Law Attorney. First Name Continue Here you, the assignor, work with one of the many ABC companies or law firms that specialize in liquidating insolvent businesses.

  5. Assignments for the Benefit of Creditors: Overview

    Assignments for the Benefit of Creditors: Overview by Steven J. Mitnick and Marc D. Miceli, SM Law PC, with Practical Law Bankruptcy & Restructuring Maintained • USA (National/Federal) A Practice Note providing an overview of assignments for the benefit of creditors.

  6. PDF The ABCs of Assignments for the Benefit of Creditors (ABCs)

    The assignment agreement is both a contract that sets forth specific duties of the assignee and a trust agreement under which the assignor transfers all of its right, title, interest in, and custody and control of its property to the third-party assignee in trust.

  7. Assignment for the Benefit of Creditors: General Overview

    An ABC is a conveyance by an assignor of substantially all of the assignor's property to an assignee for the purpose of applying the property or its proceeds to the payment of the assignor's debts...

  8. Pursuing Assignments for the Benefit of Creditors

    Assignments for the benefit of creditors (ABCs) are an alternative to formal bankruptcy proceedings. Under Florida law, an ABC is a voluntary, out-of-court process where a debtor transfers their assets to an assignee, who then liquidates these assets and distributes the proceeds to the debtor's creditors.

  9. ABC: Assignments for the Benefit of Creditors

    The Basics. The specifics of the ABC process vary by state, but it generally involves four main steps, as follows: A company authorizes (through board and any necessary shareholder consent) the shutdown of its operations and assignment of all of its assets to a third-party assignee for the benefit of the company's creditors.

  10. United States: ABC: Assignments For The Benefit Of Creditors

    The Basics. The specifics of the ABC process vary by state, but it generally involves four main steps, as follows: A company authorizes (through board and any necessary shareholder consent) the shutdown of its operations and assignment of all of its assets to a third-party assignee for the benefit of the company's creditors. The assignee, who ...

  11. PDF Assignments for the Benefit of Creditors: Delaware

    A Q&A guide to an assignment for the benefit of creditors (ABC) in Delaware. This Q&A addresses the process by which assignments are generally administered in Delaware, including the commencement and administration of the ABC, the duties and actions of assignees, creditor claims, and the jurisdiction of the court.

  12. Covering the Basics of General Assignment for the Benefit of Creditors

    The latest ABI podcast features ABI Deputy Executive Director Amy Quackenboss talking with Geoffrey L. Berman, Senior Vice President at Development Specialists, Inc. (Los Angeles), former ABI President and author of ABI's third edition of General Assignments for the Benefit of Creditors: The ABCs of ABCs.

  13. Assignment for the Benefit of Creditors: An Overview

    What is an assignment for the benefit of creditors? An assignment for the benefit of creditors ("ABC") is an alternative to a chapter 7 bankruptcy proceeding. As in a chapter 7, the debtor's assets are shepherded and liquidated for the benefit of the debtor's creditors.

  14. Primer on Florida's Assignment for Benefit of Creditors ...

    The assignment is a contract, in which the assignor turns over all assets and liabilities to the assignee for liquidation for the benefit of creditors. The assignment is a transfer of the debtor's legal and equitable title to property to the assignee, a fiduciary with authority to liquidate the debtor's affairs and distribute proceeds ...

  15. Assignment for the Benefit of Creditors

    As such, the board may decide that a more streamlined, efficient and cost-effective approach for maximizing value is appropriate - an assignment for the benefit of creditors (ABC). An ABC is initiated by the distressed company (the assignor) that enters into an agreement to assign its assets to an unaffiliated, independent entity (the ...

  16. Making Assignments For The Benefit Of Creditors As Easy As A-B-C

    resolve distress under state law" in a process called an "assignment for the benefit of creditors" (ABC).11 ABCs provide a state-law alternative to the filing of a federal bankruptcy case. Aptly named, they involve the assignment of an insolvent company's assets to a third-party assignee, who is selected

  17. Assignments for the Benefit of Creditors

    Receive an overview of the basics to general assignments for the benefit of creditors, a state law alternative for the liquidation of a distressed business that while long available under state laws, has had little use outside of states such as California, Illinois, Florida and Massachusetts.

  18. Assignments for the Benefit of Creditors: Overview

    Assignments for the Benefit of Creditors: Overview by Steven J. Mitnick and Marc D. Miceli, SM Law PC, with Practical Law Bankruptcy & Restructuring A Practice Note providing an overview of assignments for the benefit of creditors.

  19. ABC: Assignments for the Benefit of Creditors

    A company authorizes (through board and any necessary shareholder consent) the shutdown of its operations and assignment of all of its assets to a third-party assignee for the benefit of the...

  20. Assignments for the Benefit of Creditors in New York

    This Practice Note is a guide to an assignment for the benefit of creditors (ABC) for both a company and its creditors in New York. This Practice Notes addresses the basic process by which assignments are generally administered in New York. Get full access to this document with Practical Law

  21. Is an Assignment for the Benefit of Creditors like a Bankruptcy?

    An assignment for the benefit of creditors is distinct from bankruptcy proceedings because it is a much less formal process governed by state law rather than federal law. The informal nature of these proceedings means that it is faster and easier to marshal a debtor's assets, liquidate same, and distribute proceeds equitably to creditors ...

  22. Article 2

    2014 New York Laws DCD - Debtor & Creditor Article 2 - (2 - 24) GENERAL ASSIGNMENTS FOR THE BENEFIT OF CREDITORS 2 - Jurisdiction of proceedings. 3 - Requisites of general assignment. 4 - Debtor's schedule. 5 - Notice to creditors to present claims. 6 - Bond of assignee. 7 - Further security.

  23. DiNapoli & Sibley » Assignment for the Benefit of Creditors

    The assignment under the ABC itself is generally not subject to attack as a fraudulent transfer (because it is for the benefit of all creditors without preference per CCP 493.010) Nonetheless, if assignor ends up in bankruptcy, all property will be viewed as property of the estate, and any sale by assignee will be subject to Section 548 analysis