Assignment for the Benefit of Creditors (ABC)
An Alternative to bankruptcy
This page is not to be construed as offering legal advice.
Please consult your attorney before availing yourself of any legal remedy.
Assignment for the Benefit of Creditors (ABC)
An Assignment for the Benefit of Creditors, also known as a General Assignment is a remedy for insolvent firms that have assets. The process is handled through the State courts rather than through the Federal Bankruptcy court. Keep reading for more information.
Bankruptcy
Most of us are familiar with bankruptcy protection for insolvent individuals or businesses. Bankruptcy is a legal proceeding in Federal Court, typically initiated by a debtor who cannot fulfill their financial obligations. Depending on the type of bankruptcy filed, the debtor may retain their property and pay certain debts. However, in Chapter 7 bankruptcy, the most common form of bankruptcy, debtors relinquish non-exempt property to a court appointed trustee. This property is then sold to repay their debts. Once the bankruptcy process is completed, most debts but not necessarily all debts are discharged. Bankruptcy also carries with it a certain stigma, as well as expenses.
Non-Judicial Remedies
Prior to filing bankruptcy, a debtor may consider debt consolidation. In debt consolidation, a debtor combines all their outstanding debt into one payment, making it easier to manage. A debtor may also consider negotiating with their lenders to lower their balance. Debtors should consult with a credit counselor to avail themselves of these options.
General Assignment - Assignment for the Benefit of Creditors (ABC)
In Florida, and many other states, there is another alternative – Assignment for the Benefit of Creditors (ABC), or General Assignment. Such an assignment is similar to Chapter 7 bankruptcy in that non-exempt assets are sold to repay debts. However, there are some key differences. In an ABC or General Assignment, the debtor chooses the assignee, not the courts. The assignee is typically a trustworthy third party who has the knowledge and ability to execute the assignment. The assignor (debtor) executes an assignment, authorizing the assignee to take possession of, protect, and preserve their non-exempt assets, convert those assets to money, and pay their debts. The assignee then files the assignment with the state court(s) in the proper jurisdiction(s), issues public notice(s), and notifies known creditors of the assignment. The court will issue a bond requirement for the assignee based on the estimated liquidation value of the assets. The non-exempt assets are then sold and the proceeds are used to repay creditors.
In these cases, the debts are discharged through the state court, thus avoiding the stigma of bankruptcy, and possibly some of the costs. At Aaron Joseph, we are knowledgeable and capable of accepting such assignments. We are not attorneys. In many cases it is considered a conflict of interest for an attorney to act as both attorney for a debtor estate and as an assignee. It is always advisable to consult your attorney before availing yourself of any legal option.
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