An assignment for the benefit of creditors, or “ABC”, is a type of out of court settlement mechanism for dealing with debt. In most cases, when a company is going out of business, they will usually opt for either business bankruptcy or liquidation (selling off remaining assets). With an assignment for benefit of creditors, the company hires an “ABC” company to help them liquidate their assets for them in one consolidated procedure.

The benefits of the liquidation sales go to the creditors, while the ABC company takes a percentage of the sale profits as their fee. This basically makes the entire procedure faster than a regular, piece-by-piece liquidation of assets. It also takes much of the burden off of the company and business owners, who may already be pressed for time and resources.

Who Would Benefit Most From an Assignment For Benefit of the Creditors?

An assignment for the benefit of creditors works particularly well for smaller corporations and LLC’s. These smaller organizations might not be equipped for a full business liquidation procedure, which can take months or even years to fully complete. Instead, with an ABC, the company assigns (transfers) all of their assets, including the debt, to the ABC organization. At this point, the business owners can move forward while the ABC group takes care of the details of the liquidation process.

Are There Any Legal Issues Associated With An Assignment For Benefit of Creditors?

An assignment for benefit of creditors needs to be done with the consent of the creditors. Also, the ABC company will likely need to create a contract with the debtor regarding the process and procedure for the assignment. These steps can be fairly complex and may require the assistance of a lawyer. In some cases, disputes may arise. For instance, if the ABC company violates their own contractual duty to liquidate the assets, then litigation may be required.

Lastly, in some cases, the debtor might remain personally liable on some of the debt even after it has been assigned or transferred to the ABC company. This can have all kinds of effects on the business’ legal rights, as well as their credit and other factors. Thus, it’s important that the debtor fully understand their rights and responsibilities prior to entering into an assignment for benefit of creditors.

Overall, going the ABC route is generally faster and actually more profitable for the debtor in the long run than filing for bankruptcy or undergoing liquidation by themselves.

Do I Need a Lawyer For Help With An Assignment For Benefit of Creditors?

An assignment for the benefit of creditors can be a complex procedure and can involve a large amount of debt and assets. It may be in your best benefits to hire a business lawyer in your area if you need assistance with an ABC or other similar issues. Your attorney can provide you with legal research and advice in relation to the process, since business laws may differ by state. Also, if you need to attend any court meetings, your lawyer can provide you with legal representation during those times.