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.

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