What is an assignment for benefit of creditors?
An assignment for the benefit of creditors (ABC) is a legal procedure used in California as an alternative to bankruptcy. This procedure allows a business to assign its assets and liabilities to a neutral party, known as an “assignee,” in an effort to pay its creditors. The assignee is responsible for liquidating the business’s assets and distributing the proceeds to its creditors. Under an ABC, the assignee takes possession of the business’s assets and liabilities, and is responsible for managing their sale. The assignee must use reasonable care to maximize the proceeds from the sale of the assets, and then pay the creditors from the proceeds. Priority creditors must be paid ahead of unsecured creditors, in accordance with California state laws. The assignee may negotiate with creditors to restructure debt, if necessary. The assignee has authority to investigate the financial condition of the business, assess its assets and liabilities, and take possession of any assets that may have been held by the business prior to the assignment. The assignee is required to report periodically to the court, and may seek court approval before taking certain actions. The goal of an assignment for the benefit of creditors is to pay the creditors in full or as close to full value as possible, while avoiding the costs associated with a formal bankruptcy process. It is important to note, however, that ABCs are not available to every business in California. Before initiating such a procedure, it is important to consult an experienced California creditors’ rights lawyer to determine if an ABC is the right decision for your business.
Related FAQs
How can creditors collect on bad debts?What is a judgment lien?
What is a proof of claim?
What is an involuntary liquidation?
How can creditors protect themselves from debtors who fail to pay?
What is a reaffirmation agreement?
What is a constructive fraudulent transfer?
What is an assignment for benefit of creditors?
What is a claim for child support?
What is the meaning of “secured creditor”?
Related Blog Posts
What You Need to Know About Creditors’ Rights in the Courtroom - July 31, 2023The Law of Creditors’ Rights and How it Affects You - August 7, 2023
The Basics of Creditors’ Rights Law: A Guide for Debtors - August 14, 2023
How to Protect Your Rights as a Creditor - August 21, 2023
How to Utilize Creditors’ Rights Law to Your Advantage - August 28, 2023