meaning of makes an assignment for the benefit of creditors

assignment for benefit of creditors

Primary tabs.

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 ]

• commercial activities
• financial services
• business law
• landlord & tenant
• property & real estate law
• trusts, inheritances & estates
• wex definitions

• Assignment for Benefit of Creditors

Assignment for Benefit of Creditors vs. Chapter 7 Bankruptcy

Assignment for benefit of creditors is also called general assignment, or abbreviated to ABC. It is generally referred to as an alternative to bankruptcy. An ABC involves a company assigning all of its assets to a third party who takes title to the company’s assets in trust, then will sell those assets and distribute the proceeds of the sales to the company’s creditors in priority as determined by  Florida State law  under 727.114 – pack lunch, it’s a long read. While this might sound like a  Chapter 7 liquidation bankruptcy , there are some key differences in how the two processes are conducted and in their end results.

• And ABC does not discharge a company’s debts. Full stop. Only a bankruptcy fully discharges all debts at the end of the procedure.
• There is no automatic stay of collections actions or lawsuits which would be covered by the automatic stay in a bankruptcy. These actions may continue and new actions may be filed or initiated.
• Board and shareholder approval is generally required for corporations since it involves transferring the entirety of the company’s assets and property. LLCs, LLP’s, partnerships, and sole proprietorships may have an easier time entering into a general assignment.
• The assignee acts much the same way as the US trustee, however the assignee is selected by the company that is liquidating, and the US trustee is appointed by the court. Consequently the disposition of property and payment of creditors can be accomplished without court approval.

When a liquidation is in the company’s best interest, the initial impulse is to get it over with as fast as possible. However this may not be in your company’s best interest, though it may be in the best interests of your creditors. Assignees are generally picked for their knowledge of that specific area of business, and maybe trusted above the US trustee in disposing of assets with an eye to getting the highest dollar value for them. There are also no asset exemptions allowed under a general assignment. Filing for Chapter 7 may be more expensive, and take a little longer, but there are also protected asset classes that cannot be attached by creditors when undergoing a filing of bankruptcy.

As you can see, this ABC is not as easy as 123. Filing for bankruptcy is not easy either, and the process can take longer than a general assignment. Before considering an assignment for benefit of creditors in order to settle your company’s debts, I would urge you to take advantage of a  free consultation at Van Horn Law group . Bankruptcy is not a dirty word, and you may even end up the better for it in terms of obtaining credit in order to open a new business and start over. Being able to shed all of your company’s debts after emerging from bankruptcy, will leave you free and clear. Give us a call, and we can figure out what is best for you and for your business.

Get More Information

Recent Posts

• Economic Outlook

Understanding the Sahm Rule: What It Means for Your Financial Security

What Is the Sahm Rule? Implications for Your Financial Stability | Van Horn Law Group

• Bankruptcy for Businesses

Navigating Economic Challenges: A Guide for Struggling Truckers

Facing financial difficulties in the trucking industry? Discover how Van Horn Law Group can help…

Surviving a Slumping Housing Market: Support for Struggling Realtors

The real estate market has seen its fair share of ups and downs, and recent…

Florida Governor Signs Bill Increasing Motor Vehicle Exemption in Bankruptcy

The Florida Governor today signed bill SB158 into law, which increases the value of motor…

• Get Out of Debt

Here’s How to Actually KEEP Your Financial Resolutions This Year

There are many reasons why there is a high rate of financial resolutions this year.…

• About Our Firm

Van Horn Law Group: Your Solution for Affordable Bankruptcy Solution

When faced with overwhelming financial circumstances, Van Horn Law Group is your trusted partner in…

  (858) 481-1300   [email protected]

• Health & Safety Receiverships
• Partition Referee Matters
• Business Dispute Receiverships
• Cannabis Receiverships
• Rents & Profits Receiverships
• Post-Judgment Receiverships
• Legal Representation of Receivers & Referees
• Property Examples
• Meet the Team
• In the News
• Career Opportunities

Assignment for the Benefit of Creditors: A Remedy to Avoid Bankruptcy

May 24, 2021

When it comes to California contract law, ABC contracts are a well-established tool that can help individuals and entities avoid a formal bankruptcy filing. “ABC” stands for “Assignment for the Benefit of Creditors,” and the term describes a contract in which an economically troubled “Assignor” transfers control of its assets and property to an independent third party. This third party is called the “Assignee,” and they liquidate and wind-up the entity. 

How Do ABCs Work?

When a business is struggling financially without much hope of recovery, bankruptcy isn’t the only option. ABC contracts can help the entity avoid traditional or formal bankruptcy proceedings. 

These contracts work when there are significant assets that are ready to be liquidated. If the entity doesn’t have valuable assets, then an ABC contract is not typically a realistic option. However, in these circumstances where there are significant assets, the Assignor transfers all custody, control, and title to a neutral third party. 

This neutral third party navigates and facilitates the liquidation of assets and transfer of funds to the assignor’s creditors. 

Benefits of Using an ABC

There are several benefits to using an ABC. 

One of the biggest factors for most entities is avoiding Chapter 11 or Chapter 7 bankruptcy. Because ABCs are governed by state law, not federal law, struggling companies can pursue an ABC contract on their own without going through the courts. 

Working with a neutral third party can take away a lot of the stress that accompanies economic difficulties. Instead of trying to liquidate assets and transfer funds to creditors, struggling companies can pass those challenges on to the Assignee. 

Lastly, Assignors get to choose their own Assignees. That means that they are not at the mercy of the court to assign a bankruptcy trustee they don’t know or trust. When a company pursues an ABC contract, they maintain more control over process and costs. 

Going through financial difficulties can lead to feelings of helplessness and a loss of control, but this is something that you continue to have control over. 

Responsibilities of an Assignee

When the Assignor assigns property to the Assignee, that can include all corporate property, both tangible and intangible, as well as accounts, rights, and credits, including law and equity credits. 

The Assignee liquidates and sells these assets. (Note that the Assignee cannot sell the corporation or the stock.) Importantly, the corporation continues to exist during this process, even though there are no assets left by the end of the process.

The Assignee typically sells all assets without any representation or warranty. An as-is sale allows things to proceed quickly; ABCs are known for being one of the fastest ways to address significant debt issues. 

Assignees protect the assets of the estate or corporation. They are required to administer those assets fairly and in the interest of the Assignor and its creditors. 

How to Choose an Assignee

Choosing an Assignee is about finding the right third party representative. We recommend that you look for the following characteristics in your chosen Assignee:

• Experience: Choose an Assignee who has significant experience with managing and liquidating assets for struggling businesses.
• Reputation: These days, reputation means everything. It’s easy to find out through some searching if a potential Assignee is qualified and reputable. 
• Knowledge: A knowledgeable Assignee will be able to answer your questions about the process and chart out likely outcomes.  

Do You Need an Assignee? 

Griswold Law regularly manages and sells business assets. We serve as court-appointed receivers as well as ABC-contracted Assignees. To learn more about ABCs and how we can help you avoid bankruptcy, reach out today .

• There are no suggestions because the search field is empty.
• Court-Appointed Receivership (64)
• Real Estate (54)
• Partition Referee (30)
• Real Estate Transaction (29)
• Real Estate Finance (28)
• Partition Action (26)
• Commercial Properties (22)
• Hoarding (21)
• Enforcing Judgments (20)
• Business Litigation (19)
• Commercial Leases (19)
• Tenants' Rights (18)
• Foreclosure Law (17)
• Business Owners (16)
• Contract Disputes (16)
• receivership (16)
• Collections Law (14)
• Construction Law (14)
• Business Formation: Asset Protection (11)
• Uncategorized (11)
• California (10)
• health & safety (9)
• receiver (9)
• Consumer Class Action (8)
• Loan Modification (8)
• Receivership Remedy (8)
• abandoned property (8)
• receiverships (8)
• Consumer Fraud (7)
• Health and Safety receivership (6)
• health and safety code (6)
• Health & Safety Code (5)
• code enforcement (5)
• fire hazard (5)
• healthy & safety receiver (5)
• Employment Law (4)
• Fraud against Senior Citizens (4)
• Landlord (4)
• Marijuana Dispensaries (4)
• San Diego (4)
• Trade Secrets (4)
• abandoned (4)
• creditor (4)
• money judgment (4)
• nuisance property (4)
• Cannabis (3)
• Employment Class Action (3)
• Employment Discrimination (3)
• Health & Safety Code Receiver (3)
• Trademark Law (3)
• business disputes (3)
• code enforcement officers (3)
• collection (3)
• court-appointed receiver (3)
• health and safety (3)
• hoarder (3)
• real estate. california (3)
• real property (3)
• rents and profits (3)
• substandard conditions (3)
• Attorneys' Fees Clauses (2)
• City of San Diego (2)
• Health and Safety Receivership Process (2)
• Post-Judgment Receiver (2)
• Unlawful Detainer (2)
• abandoned building (2)
• bankruptcy (2)
• business (2)
• complaint (2)
• debt collection (2)
• dispute (2)
• distressed properties (2)
• foreclosure (2)
• habitability (2)
• health and saftey code (2)
• hoarders (2)
• hoarding support (2)
• judgment (2)
• judgment creditor (2)
• judgment debtor (2)
• partnership agreement (2)
• property (2)
• property value (2)
• san diego county (2)
• slumlord (2)
• tenant rights (2)
• Animal Hoarding (1)
• City of Chula Vista (1)
• Distressed Business (1)
• Historic Properties (1)
• Liquor License Receiverships (1)
• Mills Act (1)
• Neighborgood Blight (1)
• Partition Remedy (1)
• Post-Judgment Receivership(s) (1)
• Reimbursement of Employee Business Expenses (Labor (1)
• The Health and Safety Receivership Process (1)
• absentee landlord (1)
• abstract of judgment (1)
• account levy (1)
• assignment for the benefit of creditors (1)
• bank garnish (1)
• bank levy (1)
• bitcoin (1)
• board of directors (1)
• business formation (1)
• business owner (1)
• california receivership laws (1)
• city attorney (1)
• collecting judgment (1)
• commercial project (1)
• company (1)
• confidential information (1)
• confidentiality agreement (1)
• court award (1)
• court order (1)
• covid-19 (1)
• cryptocurrency (1)
• deceased owner (1)
• demolition (1)
• diliberti (1)
• disposable earnings (1)
• family law (1)
• general partnership (1)
• habitability requirements (1)
• hospitality assets (1)
• human smuggling (1)
• illegal business (1)
• illegal cannabis dispensary (1)
• illegal gambling parlor (1)
• initial inspection (1)
• joseph diliberti (1)
• judgment collection (1)
• judgment lien (1)
• lease term (1)
• liquidation (1)
• litigation (1)
• lodging properties (1)
• massage parlors (1)
• misappropriation (1)
• negligent landlord (1)
• new business (1)
• occupant relocation (1)
• partnership (1)
• partnership disputes (1)
• post-judgment collection (1)
• provisional director (1)
• public safety (1)
• real property lien (1)
• real property receiver (1)
• relocation (1)
• residential zoning laws (1)
• retail center (1)
• right of possession (1)
• san diego real estate (1)
• sex trafficking (1)
• short-term rental (1)
• sober living house (1)
• struggling hotels (1)
• substandard hotel (1)
• tenancy (1)
• unlicensed in-home business (1)
• wage garnishment (1)
• warranty of habitability (1)
• weed abatement (1)
• writ of execution (1)

Recent Posts

For more information please contact Griswold Law

Phone: (858) 481-1300

Email: [email protected]

Address: 171 Saxony Road, Suite 205, Encinitas, CA 92024

No communication via email or content posted on this website creates an attorney-client privilege. The information on this website is purely hypothetical. The information on this website should not be relied upon. If you have legal questions or are seeking legal assistance, you should contact an attorney immediately.

• California Department of Real Estate
• California Secretary of State
• State of California Courts
• U.S. Department of Housing and Urban Development
• United States District Court, Southern District of California
• United States Patent and Trademark Office

Assignments for the Benefit of Creditors – an often-overlooked state law alternative to Chapter 7 bankruptcy

For some folks the three letters ABC are a reminder of elementary school and singing a song to learn the alphabet.  For others, it is a throw back to the early 70’s when the Jackson Five and its lead singer Michael, still with his adolescent high voice, sang a catchy love song.  Then there is a select group of people in the world of corporate workouts, liquidations and bankruptcies, who know those three letters to stand for the A ssignment for the B enefit of C reditors – a voluntary state law liquidation process that may arguably offer a hospitable and friendly alternative to federal bankruptcy.  This article is a brief summary of this potentially attractive alternative to bankruptcy.

 The Assignment for the Benefit of Creditors (“ABC”), also known as a General Assignment, is a state law procedure governed by state statute or common law.  Over 30 states have codified statutes, and the remainder of states rely on common law.  See Practical Issues in Assignments for the Benefit of Creditors , by Robert Richards & Nancy Ross, ABI Law Review Vol. 17:5 (2009) at p. 6 (listing state statutes).  In some states, the statutory authority and common law can coexist.  At its most basic, the ABC process involves the transfer of all assets by a financially distressed debtor (the assignor) to an individual or entity (the assignee) with fiduciary obligations who then liquidates the assets and pays creditors.  The assignment agreement is essentially a contract involving the transfer and control of property, in trust, to a third party.  In some states that have enacted a statute, state courts may supervise the process (and at different levels of involvement depending on the statute).  The statutory scheme in other states such as California and Nevada, and in states where common law govern, do not provide for judicial oversight..  

ABCs are promoted as less expensive and more flexible than a chapter 7 liquidation and may proceed substantially faster than bankruptcy liquidation. See generally Practical Issues in Assignments for the Benefit of Creditors , ABI Law Review Vol. 17:5 (2009) at p. 8 (citations omitted).  In addition, the ABC process may provide four other noteworthy benefits not available in a bankruptcy.  First, the liquidating company chooses the assignee, there is no appointment of a random trustee or formal election required like in a bankruptcy.  This freedom of choice allows the assignor to evaluate the reputation and experience of proposed assignees, as well as select an assignee with familiarity in the nature of the assignor’s business and/or with more expansive contacts in the industry to facilitate the sale/liquidation.  Second, the ABC process generally falls under the radar of the media (particularly in states that do not require court supervision), and the assignor may avoid publicity, often negative, that can be associated with bankruptcy proceedings.  Third, with an ABC, the assignee has the ability to sell the assets without the imposition of potentially cumbersome requirements of Section 363 of the Bankruptcy Code, and in some cases, can conduct a sale the same day as the general assignment.  Finally, the ABC process generally authorizes the sale of assets free of unsecured creditor debt.  In essence, in an ABC, a company buying assets from a distressed business does not acquire the debt of the assignor.

On the down side, ABCs do not provide the protection of the automatic stay that is triggered upon the filing of a bankruptcy petition.  In some situations, the debtor entity needs to stop the pursuit of creditors immediately, and a bankruptcy proceeding will supply this relief.  Unlike bankruptcy, the sale through an ABC: i) is not free and clear of liens; ii) unexpired leases cannot be assumed and assigned without the consent of the contract counter-party; and iii) insolvency can trigger a default under an unexpired lease or executory contract. See generally Practical Issues in Assignments for the Benefit of Creditors , ABI Law Review Vol. 17:5 (2009) at p. 20. In general, an ABC is not a good choice for debtors that have secured creditors that do not consent because there is no mechanism for using cash collateral or transferring assets free and clear of liens without the secured creditors’ consent.  In cases where junior lienholders are out of the money, there is no incentive for those creditors to voluntarily release their liens.  In addition, while unsecured creditors do not have to consent to the general assignment for it to be valid, choosing this alternative forum may cause concern for creditors (particularly those used to the transparency of a court-supervised bankruptcy or receivership proceeding) and invite the filing of an involuntary bankruptcy. Therefore, it is prudent to involve major creditors in the process, and perhaps even in the pre-assignment planning. In addition, if an involuntary petition is filed, the assignee could request that the bankruptcy court abstain in order to proceed with the ABC.

Using the ABC state process in lieu of filing for bankruptcy in federal court may result in a more streamlined, efficient liquidation process that is less expensive and likely completed quicker than a federal bankruptcy proceeding.  In some jurisdictions, such as New Jersey, workout professionals note anecdotally that corporate clients fare better under this state law alternative rather than the lengthy, more complicated federal bankruptcy proceedings.

Many bankruptcy professionals are unfamiliar with the procedures of ABC and are reluctant to recommend it as a method for liquidating assets and administering claims.  This lack of familiarity may be a disservice to potential clients.  

[ View source .]

Related Posts

• Who’s a Party in Interest? The Supreme Court’s Ruling in Truck Insurance Exchange v. Kaiser Gypsum Co. Inc. Opens the Door for Insurers to Intervene in Certain Bankruptcy Proceedings
• The More Things Change, The More They Stay The Same? Survival Of Small Businesses Again Dependent On Action From Congress
• Mediation in Bankruptcy: A Glimpse
• In re The Hacienda Company, LLC – Round 2: Bankruptcy Courts May be Available to Non-Operating Cannabis Companies to Liquidate Assets
• PAGA Dischargeable in Bankruptcy?

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

Refine your interests »

Written by:

PUBLISH YOUR CONTENT ON JD SUPRA NOW

• Increased visibility
• Actionable analytics
• Ongoing guidance

Published In:

Fox rothschild llp on:.

"My best business intelligence, in one easy email…"

Assignment For The Benefit Of Creditors: An Overview

Contributor.

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. An ABC is governed by statute and can either be court-supervised or conducted out of court. In New York, an ABC is governed by Article 2 of the Debtor and Creditor Law.

In an ABC proceeding, the debtor is referred to as an assignor, because it makes a transfer of all its assets to an assignee who serves as a trustee. The assignee is charged with placing all the assets in trust in order to liquidate and distribute the proceeds to creditors. While an ABC has many similarities with a chapter 7 liquidation, the two do differ in two important regards:

• an ABC does not afford a debtor an automatic stay from creditor collection; and
• a sale does not provide the purchaser with the right to purchase the assets free and clear of liens – unlike a 363 sale in Bankruptcy.

To commence an ABC, an assignor executes an assignment conveying all its assets to the assignee, who becomes a fiduciary on behalf of the assignor and its creditors. The assignee then collects and liquidates assets by collecting accounts receivable, conducting an auction sale, sometimes to a stalking horse bidder who starts the bidding, or through a going out of business sale.

An assignor also has powers under state law to recover fraudulent pre-ABC transfers of assets and preferential payments made to creditors. In New York, the "look-back period" for recovering these transfers is four years.

When it comes to distribution of the assets collected by the assignee, an ABC proceeding follows an established order of priority, which is set forth in either the state's unique ABC laws or in the deed of assignment. The assignee tallies the proofs of claim that were filed by the creditors in the proceeding and pays the claims, either in full or on a pro rata basis in accordance with the priority scheme.

After the assignor's assets have been liquidated and creditors have been paid out, the assignee must prepare an accounting detailing the flows of monies in and out of the estate during the case, which may have to be filed with the court supervising the proceedings. As part of the accounting process, the assignee asks the court to close the estate, which notifies all interested parties that (i) the estate has been fully administered, (ii) that the assignee's work is complete, (iii) that no further distributions need be made, and (iv) that the assignment is terminated.

An ABC is a useful, cost-effective alternative to a traditional chapter 7 bankruptcy liquidation, and may suitably serve liquidation requirements in some situations.

Originally published 03/07/2023

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Insolvency/Bankruptcy/Re-Structuring

United states.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Our Services

Business advisory.

Turnaround & Restructuring

Appraisals & Valuations

Fiduciary Services

Forensic Accounting

Financial Advisory

Litigation Support

Interim Management

Real Estate Solutions

Corporate trust, what is assignment for the benefit of creditors, explaining an emerging alternative to bankruptcy to resolve distress.

What is an ABC?

Assignment for the benefit of creditors (ABC) is a state law winddown procedure that allows for the orderly winddown of a company. The ABC provides for the appointment of an independent fiduciary representative – known as an assignee. The assignee manages the orderly wind down of the business and monetizes the company’s assets for the benefit of the company’s creditors. The assignee will then distribute the proceeds generated from the sale of the company’s assets to the company’s creditors according to state law.

Important pre-approval considerations :

• The decision must be approved by both the board and shareholders.
• Jurisdiction matters – 35 states have some form of an ABC in its laws. Each state will have different considerations and procedures to follow.

What are the benefits of an ABC?

• Choice: Unlike a receivership or a Chapter 7 Case, the board has the ability to select the assignee.
• Time: A bankruptcy case is a lengthy process with many procedural requirements. Most ABCs are significantly less time-consuming than a bankruptcy case or a receivership.  
• Savings: The shortened engagement time for ABCs means billing is leaner – many times, ABCs can provide higher returns.
• Distributions to Creditors: Since the cost of an ABC is usually less than a bankruptcy case or a receivership, the actual return to creditors is usually greater in an ABC than in a bankruptcy case or a receivership. In addition, due to the expedited nature of an ABC, distributions to creditors will usually occur sooner in an ABC than in a bankruptcy case or a receivership.

What else should be considered in ABCs?

ABCs have some key differences from bankruptcies which should be carefully considered. For example, there are no automatic stays or statutory caps for landlord claims or employment claims in ABC. Leases and other executory contracts may be more difficult to assign in an ABC than in a bankruptcy case. In addition, ABCs can only be used for a winddown or sale of the business, not reorganization of the business

Interested in learning more?

Resolute’s team of experts include Steve O’Neill , who has more than 35 years of legal experience in ABCs, complex bankruptcy cases, and sale/winddown of companies; and Jeremiah Foster , who has served bankruptcy trustee and liquidating trustee in a variety of ventures.

Please contact us if you would if you’d like to learn more about ABCs or explore your company’s options.

Parsippany: (973) 538-4700

Fein Such Kahn & Shepard

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 .

Related Posts

New Jersey Assembly Bill A3772 Amends Procedure for Tax Foreclosures

FSKS Celebrates Jennifer L. Holowach’s Joyous Marriage and New Chapter as Jennifer L. Saint-Louis

Real Estate Practice Alert: New Flood Risk Disclosure Requirements in New Jersey Take Effect on March 20, 2024

Navigating the Corporate Transparency Act: Key Considerations & Compliance Guidelines

• Client Forms

(973) 763-6060

• Why Choose Us
• Representative Work
• Bart J. Klein
• Alex W. Klein, Of Counsel

Practice Areas

• Construction Lien & Bond Claims

Assignment for the Benefit of Creditors - Defenses to Preference Suit By an Assignee

At one time or another, many of our commercial litigation clients have been sued by an “assignee for the benefit of creditors.” When our clients receive a summons and complaint notifying them they are being sued by an assignee, it may be unclear to them why they are being sued. The answer is often that our client’s former customer has made an "assignment for the benefit of creditors." The former customer has authorized a person or entity, often an attorney, to collect and liquidate the customer’s assets and sue our client in an attempt to obtain payments that the former customer previously made to our client. In other words, having been paid for goods sold or services performed, our client now faces the possibility of having its money earned taken away. This post aims to explain why this is a possibility and the potential defenses to such an action.

What Is An Assignment for the Benefit of Creditors?

In layman’s terms, an “assignment for the benefit of creditors” is when a company, usually suffering from financial difficulties, can sell off its assets to pay its creditors. It functions much like a bankruptcy proceeding, except it is based upon state law. In New Jersey, assignment for the benefit of creditors proceeding are governed by the Assignment for Benefit of Creditors Statute (the statute), N.J.S.A. 2A:19-1 to 50. The statute's purpose is to treat all creditors equally and avoid disproportionately favoring any single creditor. N.J.S.A. 2A:19-2.

What is an Assignee?

An “assignee” is an independent third party to whom the business distributing its assets, known as the “assignor”, conveys or assigns, all of its assets in trust.

What can an Assignee Do?

The assignee is empowered with two roles. Subject to certain exceptions, the assignee has the power to dispose of all of the property that the assignor owned at the time of the assignment. The assignment is the document that establishes the transfer of property from assignor to assignee. Pursuant to N.J.S.A. 2A:19-13, the assignee

[M]ay sue for and recover in his own name everything belonging or appertaining to the estate. He may compromise, settle and compound all claims, disputes and litigations of the assignor, refer the same to arbitration, agree with any person concerning the same, redeem all mortgages and conditional contracts, and generally act as and do whatsoever the assignor might have lawfully done in the premises.

In short the assignee may do anything with the property of the assignor that the assignor could do. The second role of the assignee is to represent all of the assignor’s creditors.

How Can the Assignee Take Money Away From My Business?

The answer to this question lies in the second role of the assignee. Because the assignee is obligated to represent all of the assignor’s debtors equally, the assignee has a limited right to recover payments made by the assignor to third parties within 4 months of the general assignment. N.J.S.A. 2A:19-3. In short, if your former customer is the assignor, and your former customer paid you, then made a general assignment less than 4 months later, the assignee can sue you in an attempt to force you to return the money. The reasoning behind this is that in making the original payment to you prior to making the assignment, the assignor has given you preferential treatment in comparison to the other creditors. This type of payment is known as a “preference.”

How Can I Stop the Assignee from Claiming Taking My Money As a Preference?

Whether or not you can stop an assignee from taking your money boils down to the whether you received the money as a preference. The statute governing assignment for the benefit of creditors is vague and there is a limited amount of case law interpreting the statute. There is no definition of “preference” in the assignment for the benefit of creditors statute. One must look elsewhere for answers to this question.

The New Jersey statutory scheme governing corporations does define “preference.” In addition, New Jersey’s Rules of Court provide that "The practice relating to assignments for the benefit of creditors under N.J.S.A. 2A: 19-1 et seq. shall conform as nearly as practicable to the procedure relating to insolvent corporations." Thus, the definition of “preference” in the statute governing corporations is a good place to look. There, a preference is deemed to arise when:

(a) a corporation which, while insolvent, and within four months of the commencement of a receivership action by or against it, transfers any property to or for the benefit of a creditor for or on account of an antecedent debt; and

(b) the effect of such transfer will be to enable such creditor to obtain a greater percentage of his debt than some other creditor of the same class; and

(c) the creditor receiving or to be benefited by the transfer, or his agent acting with reference thereto, has, at the time when the transfer is made, reasonable cause to believe that the corporation is insolvent.

N.J.S.A. 14A:14-14(1). Payments made to satisfy pre-existing debts within 4 months of an assignment would constitute preferences under this definition if the effect is to prefer the recipient of the payment to other creditors and the creditor has reasonable cause to believe the debtor is insolvent. By contrast, payments not meeting this description would not be recoverable by an assignee. This suggests that bankruptcy defenses to a preference, like a contemporaneous exchange for new value, where payment is made to the creditor not to satisfy a pre-existing debt, but to pay for newly delivered goods or services, are also valid defenses against an assignee.

Is It Worth Fighting An Assignee Trying to Recover a Preference From Me?

When the payment at issue is obviously a preference, it is likely not possible to stop the assignee from taking money that was made as part of a preferential transfer. In such situations, a careful analysis should be made as to whether or not it is more cost effective to fight a lawsuit filed by the assignee or agree to a settlement. However, where a payment is not clearly a preference, you may be able to stop the assignee from taking your money and there may be good reason to fight the assignee’s lawsuit.

New Jersey Business and Collection Lawyers

The New Jersey business lawyers at the Law Office of Bart J. Klein advise clients on issues relating to New Jersey a broad range of business disputes and commercial disputes , including breach of contract and commercial collection cases. We represent both creditors and debtors and are well versed in the law governing judgment collection. We welcome you to call us at (973) 763-6060, email [email protected] , or complete our online contact form for more information.

Disclaimer: The Law Office of Bart J. Klein maintains this website exclusively for informational purposes. It is not legal or other professional advice and does not necessarily represent the opinion of The Law Office of Bart J. Klein or its clients. Viewing this site, using information from it, or communicating with The Law Office of Bart J. Klein through this site by Internet or email does not create an attorney-client relationship between you and The Law Office of Bart J. Klein. Online readers should not act or decline to act, based on content from this site, without first consulting an attorney or other appropriate professional. Because the law changes constantly, this website's content may not indicate the current state of the law. Nothing on this site predicts or guarantees future results. The Law Office of Bart J. Klein is not liable for the use or interpretation of information contained on this site, and expressly disclaims all liability for any actions you take or do not take, based on this site's content.

Business Law Civil Litigation Commercial Litigation Construction Litigation Construction Liens Municipal Mechanics Liens Labor & Employment Law Nationwide Litigation Management

For More Information

Recent blog posts.

Aug 24 Pay When Paid v. Pay if Paid in New Jersey August 24th, 2018 The key to differentiating between the two types of payment clauses is whether or not the language in the payment provision is absolutely clear that the risk of nonpayment is being transferred downstream... Read More Jun 11 Docketing a Foreign Judgment in New Jersey June 11th, 2018 In New Jersey, the Uniform Enforcement of Foreign Judgments Act, N.J.S.A. 2A:49A-25 et seq., dictates the procedure for docketing an out of state judgment, referred to as a “foreign” judgment, in New Jersey. Read More May 25 New Jersey’s Construction Lien Law Interpreted in Recent Appellate Division Opinion May 25th, 2018 The opinion in NRG REMA, LLC, et al. v. Creative Environmental Solutions Corp., addresses two important issues relating to the Construction Lien Law. Read More

Read more from our Blog

Meet Our Attorneys

We represent clients and appear in courts throughout the State of New Jersey, including the counties of Atlantic, Bergen, Burlington, Camden, Cape May, Cumberland, Essex, Gloucester, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Salem, Somerset, Sussex, Union and Warren.

The communications contained on this website are an effort to collect a debt. Any information obtained may be used for this purpose.

© 2024 Law Office of Bart J. Klein

View Our Disclaimer | Privacy Policy Law Firm Website Design by The Modern Firm

COVID-19 Quarantine Update

In regards to Covid-19,  We are reviewing the best guidelines for our city and state for how

we should conduct business and plan to update this message as soon as we can.

Please call our office(s) to get learn how we are engaging with current clients and new at this time.

Assignment for the Benefit of Creditors (ABC)

Rappaport Osborne & Rappaport has the expertise to represent the corporate debtor (“Assignor”), the third party receiver (“Assignee”), or creditor in an Assignment for the Benefit of Creditors Proceeding (“Assignment Proceeding”).

An Assignment Proceeding is an alternative to bankruptcy.

An Assignment Proceeding is a state statutory device that allows an Assignor (a corporate debtor) to convey all of its assets to a third party Assignee to be liquidated and distributed pro rata to the creditors of the debtor.

An Assignment Proceeding is usually simpler and less expensive than filing a corporate bankruptcy. It can offer great advantages to the Assignor, such as choosing the Assignee. However, there is no “automatic stay” in an Assignment Proceeding. Although the assignment statute prevents unsecured judgment creditors from executing against assets of the estate, the statute does not prevent creditors from commencing or continuing litigation against the Assignor based on pre-assignment claims. Nor does it prevent secured creditors from immediately exercising their rights in the debtor’s pledged collateral.

Finally, since the Assignment Proceeding is not bankruptcy, an assignment may avoid the stigma and, potentially, the resulting reduction in value of assets associated with bankruptcy filings.

1300 North Federal Highway #203 · Boca Raton · Florida · 33432 · USA - PHONE: 561-368-2200 EMAIL US - © 2024 rorlawfirm.com

Simple English definitions for legal terms

assignment for the benefit of creditors

Read a random definition: accessory before the fact

A quick definition of assignment for the benefit of creditors:

An assignment for the benefit of creditors is when a person who owes money to many people gives their property to someone else to sell and use the money to pay back the people they owe. If there is any money left over, it goes back to the person who owed the money. This is like a different way to handle money problems instead of going to court for bankruptcy. But, the person who owed the money still has to pay back what they owe because the people they owe did not agree to let them off the hook.

A more thorough explanation:

An assignment for the benefit of creditors is a legal process where a debtor's property is transferred to another person, who then sells the assets to pay off the debtor's debts. This process is an alternative to filing for bankruptcy and is governed by state law .

For example, let's say a small business owner is struggling to pay off their debts. They may choose to make an assignment for the benefit of creditors, which means they transfer ownership of their assets to a trustee. The trustee then sells the assets and uses the proceeds to pay off the business's debts. Any remaining funds are returned to the business owner.

Another example could be an individual who owes a large amount of money to various creditors. They may choose to make an assignment for the benefit of creditors, which means they transfer ownership of their assets to a trustee. The trustee then sells the assets and uses the proceeds to pay off the individual's debts. Any remaining funds are returned to the individual.

Overall, an assignment for the benefit of creditors is a way for debtors to pay off their debts without going through the formal bankruptcy process. However, it's important to note that the debtor is not discharged from their unpaid debts through this process.

Assignment Division | assignment of dower

• Data download

Help us make LSD better!

Call For Consultation

(908) 373-8500

• Michael McLaughlin, Esq.
• John J. McLaughlin, Esq. (Late)
• Firm Overview
• An Overview
• Chapter 7 Bankruptcy
• Chapter 13 Bankruptcy
• Real Estate Considerations in Bankruptcy
• Individual Chapter 11 Cases
• Analyze a Restructure Plan
• Assignment for the Benefit of Creditors
• Receivables
• Collect On Judgement
• Foreclosure
• Client Testimonials
• Attorney Endorsements
• In The Media
• Bankruptcy Videos
• Personal Bankruptcy Videos

Assignments For The Benefit Of Creditors

What Is Assignment For The Benefit Of Creditors

An assignment for the benefit of creditors is a state court-administered proceeding somewhat similar to a Chapter 7 bankruptcy proceeding whereby an individual, a partnership, or a corporation in financial difficulty is able to liquidate its assets in an orderly manner and pay its creditors a pro-rata share of their individual claims. However there are significant differences between an assignment for the benefit of creditors, a state court receivership or a bankruptcy proceeding, that must be taken into account when an attorney is advising a client in financial distress. These differences will be highlighted in this presentation.

An Assignment is voluntary and is commenced by the “assignor” executing a formal “Deed of Assignment” in favor of an “assignee”. In substance it is similar to a deed of real estate and must be recorded in the county clerk’s office of the county of the assignor or the clerk of the Superior Court. The contents of the Deed of Assignment should confirm to N.J.S.A. 2A:19-4, and contain an inventory of assets. (See 44 New Jersey Practice Series Form 3.111) The deed effectively transfers all the assets of the assignor to the assignee who is empowered to liquidate the assets after receiving court approval, for the best prices available, at auction, or otherwise, in the assignee’s discretion, all, however for the benefit of the creditors of the assignor who will receive their pro-rata dividend depending on the amount of their claim, after payment of administration expenses.

History of Assignment for the Benefit of Creditors.

Assignments have an interesting history. They originated in the Middle Ages and were utilized by merchants who belonged to Guilds. When a merchant found himself in financial trouble he would voluntarily turn over all his assets to a member of the Guild who would make arrangements for sale and disposition of the property and pay the debtor’s creditors a fair share of the proceeds. The concept then was that members of Guild were the most knowledgeable people in the industry and could produce the most at a sale. For example, if the debtor was a jeweler, a furrier, or a cabinet maker, the Guild members who knew the market for the products would be able to get the best prices. The assignee would be a member of the Guild and the members would have confidence in that person to fairly and effectively liquidate the debtor’s assets.

The concept of a voluntary assignment was retained through the ages and ultimately was codified by statute. In New Jersey assignments are governed by N.J.S.A. 2A:19-1 et seq. The interesting thing about the codification of the common law is that the law retained the provision that the assignor can select his own assignee. In a state court receivership or a bankruptcy preceding the person designed to liquidate the assets is a “Receiver” or “Trustee”, and in each of these cases the debtor has no say in who is to be designated to liquidate the assets. The court makes the decision. This is an important concept to take into account when an attorney is considering what avenue to recommend when advising his/her client who is in financial difficulty.

Some General Observations

An assignment is rarely appropriate for an individual because, unlike a bankruptcy proceeding, the assignor does not receive a discharge. Accordingly, unless the attorney for the debtor was able to negotiate a release of the creditor’s claims in advance, and an agreement to the assignment, this avenue would not be appropriate. However, it should be mentioned that since Assignments generally proceed much quicker, more efficiently, and often produce better results and a higher dividend for creditors, in a given case, especially where the debtor has had a good relationship with his creditors the attorney should consider seeking the approval of the creditor body for the assignment and obtain agreement in writing from each of the creditors to accept the dividend in full satisfaction of their claim. When the attorney for the debtor decides to take the assignment route he should select an attorney as assignee who is familiar with liquidation proceedings, knows how to protect the assets pending their disposition by sale or otherwise, and knows experienced appraisers and  auctioneers who are familiar with the markets, who will properly appraise the assets and advertise the assets in a manner designed to command the best prices.

Assignee’s Powers and Duties & Administration of the Estate

Execution of the deed vests in the assignee legal title to all the assignor’s real and personal property, including property located outside of New Jersey. In effect, the assignee stands in the shoes of the assignor and has the right to commence actions on behalf of the estate, settle claims and take any other action relative to the handling of the assets that the assignor could have done had he/she not make the assignment. The assignee will immediately inspect the premises of the debtor, obtain insurance if necessary to protected the assets, change locks at the debtor’s place of business, deal with the utilities, the landlord, arrange with the postmaster for forwarding mail to the assignee, and in general do all that is necessary to protect the assets, just as the assignor would have done. All these steps are taken on an emergent basis, another reason why the debtor’s attorney should select an experienced attorney knowledgeable about the process of dealing with insolvent estates, someone who deals with locksmiths, landlords, impatient creditors, taxing authorities, lien holders, all clamoring for payment of their overdue bills. When necessary the assignee will seek court approval for retention of experts, such as accountants, appraisers, and auctioneers, and any other experts the assignee deems necessary for the proper administration of the estate.

The assignee will give proper notice to the creditors of the estate and advise them that their claims must be filed by a certain date or be barred from participation in any dividend.

The assignee with meet with the assignor for the purpose of familiarizing himself with the nature of the business, determining what causes of action should be investigated, as well as the validity of claims filed by creditors .

In unusual circumstances it might be advisable to continue the assignee’s business for a limited period of time either to wind down certain operations, collect receivables , or some other valid reason. The assignee must receive formal approval from the court in order to take this step.

After taking possession of the debtor’s property and making a determination of the extent of the assets of the debtor’s estate, the assignee, before disposing of the debtor’s property by private or public sale, must immediately conduct proper searches to learn whether there are any valid liens on the property. This search includes a title search if real estate is involved, a Uniform Commercial Code search to see if there are any encumbrances on inventory or accounts receivable. Tax searches and a judgment search must be made to see if there are any private or governmental  liens on the debtor’s property. Having conducted all the proper searches the assignee should promptly proceed to liquidate the assignor’s property and convert it to cash, terminate any leases and surrender the property to the landlord.

It is common to liquidate the assets of the estate at a public auction, and the assignee will take steps to select an appraiser, and auctioneer that he is familiar with, and advertise the date of the public sale of assets and give notice to the creditors. On occasion a private sale might be appropriate, but in this instance court approval should be obtained and notice should be given to creditors. These are all steps which are, subject to court sanction, within the powers of the assignee.

Other powers of the assignee are recovery of fraudulent transfers and preferential transfers. There are significant differences in the time periods involved here that are different from the bankruptcy statutes and must be taken into account by the assignor’s attorney when deciding if an assignment is appropriate for the client. For example, the preference period under the assignment statute is 120 days, one month longer than that provided for in the Bankruptcy Code. Another important difference between an Assignment and a Bankruptcy proceeding is the limit of the recovery of former employees for unpaid wage, benefit, or vacation time. Under the Bankruptcy Code an employee may recover up to $11,725.00 for any unpaid wage claim; the limit under the Assignment Act is $400.00 These two factors alone might be important consideration in deciding which proceeding to employ.

Assignee’s Final Account and Procedure

Once all assets have been liquidated, all claims examined and approved, the assignee makes a final accounting with the court, on notice to creditors and the procedure is not essentially different from that in a state court receivership or a bankrupcty court, except the forms and the time periods are different. If the court approves the accounts, formal papers are filed to complete the case and creditors are given their dividends. The Surrogate of the county examines and approves the final accounting of the assignee. The judge assigned to the case awards fees to the assignee from the proceeds of the sale of assets. After payment of dividends to the creditors this concludes the case.

Get Information on Assignments For The Benefit Of Creditors;  call Michael McLaughlin, LLC, for  an initial consultation  at  (908) 373-8500 and get the legal answers you seek.

Click here to link learn more about Business Bankruptcy

Schedule A Consultation (908) 373-8500

Copyright©2024, Michael McLaughlin LLC. All Rights Reserved.

Assignment for the Benefit of Creditors

Related services.

• 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.

• Assignment for the Benefit of Creditors

Helping Florida business owners exit gracefully and move on with less time and hassle than bankruptcy

An assignment for the benefit of creditors (ABC) is one way for an insolvent company to wind down its operations in an orderly fashion. Like a Chapter 7 business bankruptcy, an ABC involves selling the company’s assets and using the proceeds to pay off creditors, but without the stigma of a bankruptcy on their credit report or the mind of the public.

The business attorneys at Edelboim Lieberman have successfully helped many South Florida companies with an assignment for the benefit of creditors. Learn more about ABCs below, and call Edelboim Lieberman in Miami or Fort Lauderdale to find out if an ABC is right for you.

How does an ABC work?

The owner of the company (the assignor) makes an assignment, or transfer, of company assets and debts to another company or law firm (the assignee). The assignee is then responsible to sell the assets and use the proceeds to pay off the creditors. By using an ABC, the assignor gets to move on quickly from the insolvent company without having to personally go through the process of liquidating assets and paying creditors or going through the Chapter 7 bankruptcy process.

ABCs Under Florida Law

Unlike a Chapter 7 bankruptcy, which takes place in federal bankruptcy court and is supervised by a federal bankruptcy trustee, ABCs are filed in and supervised by the Florida state courts. Florida Statutes Chapter 727 governs an assignment for the benefit of creditors.

Following are some important points about the way ABCs operate in Florida:

• ABCs must be in writing. Florida statutes provide a sample form of assignment; the ABC should be in substantially the same form.
• An ABC represents an irrevocable assignment.
• The assignee files the assignment with the court, publishes a notice of the assignment as required by law and also notifies creditors of the assignment.
• In certain situations, the assignee can carry on the business for a period to maximize return.
• The assignee can reject an unexpired lease.
• The assignee can hire professionals as needed, such as accountants, appraisers, auctioneers, and attorneys, to assist in the liquidation of assets.
• The assignee can examine the validity and priority of claims and litigate disputed claims.
• The assignee can sue to enforce claims the assignee may have by virtue of the assignment or assign a cause of action to another party.
• The assignee must file interim and final reports with the court.
• Any monies left over after creditors are paid goes back to the assignor.

Is an ABC better than bankruptcy?

An ABC liquidates assets and winds down business operations similar to a Chapter 7 bankruptcy, and an ABC is conducted under court supervision like Chapter 7. However, an ABC can offer advantages over Chapter 7 in many instances. Importantly, an assignee typically gets a greater return when selling assets since the assignee is frequently knowledgeable about the industry and is often a skilled and experienced negotiator. Additionally, an assignee can continue to run the business as a going concern for a while and even sell it as such, which a bankruptcy trustee won’t do.

ABCs also offer more privacy to the assignor, as opposed to going through the public court filings of a bankruptcy. And the ABC is faster for the assignor. The assignor makes the assignment and is done, rather than going through bankruptcy which can take months or years depending on the assets to be liquidated.

On the other hand, an assignor does not get the benefit of the automatic stay afforded by bankruptcy, which might encourage a company to file for bankruptcy instead. Yet one could argue there is no reason a creditor would go after an assignor after the ABC has been executed, knowing the assignor no longer has assets. Generally speaking, ABCs are usually a less litigious process than Chapter 7 for businesses.

Is an ABC right for me?

If you have racked up a large amount of debt with a lot of different creditors and you see that your business is not going to make it, an assignment for the benefit of creditors might be the smart move. Especially if you have a large number of assets, liquidating the business to pay off your creditors can take months or even years. An ABC lets you transfer all your assets and debts at once, allowing you to move on immediately while the assignee takes on the burden of handling the liquidation and paying off creditors.

Since there are pros and cons to both Chapter 7 bankruptcy and ABCs, and there may be other unexplored alternatives as well, the best thing to do is sit down with an experienced business bankruptcy attorney to analyze your situation and look at all your options, so you can choose the best path forward that makes sense for you.

Get Help Today With an Assignment for the Benefit of Creditors in Miami and South Florida

For help with an Assignment for the Benefit of Creditors or other aspects of business bankruptcy in South Florida, contact Edelboim Lieberman at their offices in Miami and Fort Lauderdale by calling 305-768-9909 for a no-cost, confidential consultation.

Practice Areas

• Business Bankruptcy
• Commercial Litigation
• Real Estate
• Adversary Proceedings
• Creditor Rights and Representation
• Morgan B. Edelboim
• Brett D. Lieberman
• Edan Weiner
• Rebecca Waldman de la Zerda

I used this law firm to evict my tenant on Hollywood beach. They were running an daycare business out of the apartment we rented and they were subletting. I found this law firm locally on ... read more

One of my colleagues called this firm for information on doing a residential eviction for a single family home she rented in Hollywood FL. The eviction lawyers were very professional and extremely knowledgeable. Call them ... read more

Great and fast services. Like to work with professionals who value your time and budget.

I used this law firm to advise me on commercial closings and landlord-tenant law. These attorneys are knowledgeable and efficient. Highly recommend.

Advertisement

19 Facts About Tim Walz, Harris’s Pick for Vice President

Mr. Walz, the governor of Minnesota, worked as a high school social studies teacher and football coach, served in the Army National Guard and chooses Diet Mountain Dew over alcohol.

• Share full article

By Simon J. Levien and Maggie Astor

• Published Aug. 6, 2024 Updated Aug. 9, 2024

Until recently, Gov. Tim Walz of Minnesota was a virtual unknown outside of the Midwest, even among Democrats. But his stock rose fast in the days after President Biden withdrew from the race, clearing a path for Ms. Harris to replace him and pick Mr. Walz as her No. 2.

Here’s a closer look at the Democrats’ new choice for vice president.

1. He is a (very recent) social media darling . Mr. Walz has enjoyed a groundswell of support online from users commenting on his Midwestern “dad vibes” and appealing ordinariness.

2. He started the whole “weird” thing. It was Mr. Walz who labeled former President Donald J. Trump and his running mate, Senator JD Vance of Ohio, “weird” on cable television just a couple of weeks ago. The description soon became a Democratic talking point.

3. He named a highway after Prince and signed the bill in purple ink. “I think we can lay to rest that this is the coolest bill signing we’ll ever do,” he said as he put his name on legislation declaring a stretch of Highway 5 the “Prince Rogers Nelson Memorial Highway” after the musician who had lived in Minnesota.

4. He reminds you of your high school history teacher for a reason. Mr. Walz taught high school social studies and geography — first in Alliance, Neb., and then in Mankato, Minn. — before entering politics.

5. He taught in China in 1989 and speaks some Mandarin. He went to China for a year after graduating from college and taught English there through a program affiliated with Harvard University.

We are having trouble retrieving the article content.

Please enable JavaScript in your browser settings.

Thank you for your patience while we verify access. If you are in Reader mode please exit and  log into  your Times account, or  subscribe  for all of The Times.

Thank you for your patience while we verify access.

Already a subscriber?  Log in .

Want all of The Times?  Subscribe .