What is an assignment for benefit of creditors?

An assignment for the benefit of creditors is a legal procedure under Tennessee creditors rights law which a company uses to transfer its assets to a trustee. This allows the company to pay off their debts and liquidate the assets in an orderly fashion. The individual or company who is making the assignment is called the "assignor." The trustee is responsible for collecting the assets and or other property that has been assigned and distributing them to creditors as payment for outstanding debts. The trustee must follow Tennessee state law as well as federal law in order to properly execute the assignment for the benefit of creditors. First, all secured creditors must be paid. Then, if any money is left over, it is divided among the remaining creditors in the order of priority which is outlined in the statute. The assignor will also be prohibited from transferring or disposing of any assets that can be used to pay off creditors without approval from the trustee. That way, any assets held by the assignor can be disbursed to creditors instead of the assignor. Ultimately, the goal of an assignment for the benefit of creditors is to pay off creditors and liquidate the assets of the company as quickly and efficiently as possible.

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What is an assignment for benefit of creditors?

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