Assignment for the Benefit of Creditors
ASSIGNMENT FOR THE BENEFIT OF CREDITORS —NATIONWIDE ASSIGNEE SERVICES
Maximizing Value For All Stakeholders
An Assignment for the Benefit of Creditors (ABC) is a legal process in which a debtor assigns all of its assets to an independent third party, called an assignee, for the purpose of liquidating the assets and paying off the creditors. This process is an alternative to bankruptcy, and it allows a debtor to avoid the lengthy and costly bankruptcy process while still getting relief from its creditors.
The debtor will appoint an assignee, who will take possession of all the assets of the debtor and will be responsible for liquidating them and distributing the proceeds to the creditors according to the priority of their claims. The assignee will be responsible for identifying, collecting, and liquidating all assets, and for making payments to the creditors.
The ABC process is usually faster than bankruptcy and it allows the debtor to have more control over the liquidation process. It also provides a way for the debtor to avoid the negative impact of a bankruptcy filing on its credit rating. However, there are also some limitations to the ABC process, such as a lack of protection from certain types of claims and a lack of automatic stay to halt litigation against the debtor.
It’s important to note that the laws regarding ABC vary state by state, and the process may have different name depending on the location.
An Assignment for the Benefit of Creditors (ABC) or General Assignment/Creditor Assignment can be a prudent alternative to bankruptcy for maximizing value for troubled private and public companies and their creditors.
The process of an Assignment for the Benefit of Creditors is initiated by the distressed entity (assignor) entering into an agreement with the assignee responsible for conducting the wind-down and/or liquidation or going concern sale in a fiduciary capacity for the benefit of the assignor’s creditors. The assignment agreement is a contract under which the assignor transfers all of its right, title, interest in, and custody and control of its property to the assignee in trust. The assignee divests the property and distributes the proceeds to the assignor’s creditors.
Our award-winning services have earned us the distinction of being the only Court-Appointed Receiver/Assignee in the country that the United States Environmental Protection Agency (USEPA) allows to conduct such services on active Superfund Sites.
We are pleased to serve as Court-Appointed Keepers (Assignees) for the U.S. Marshals Service for federal court seizures of assets under admiralty jurisdiction.
An Assignment for the Benefit of Creditors requires highly-trained—highly skilled—highly credentialed—highly-experienced special assets and special situations transitional management, valuation, and disposition experts with decades of proven experience and unimpeachable credibility.
For over 40 years in hundreds of assignments worldwide, Equity Development Systems, Ltd. has skillfully guided and judiciously represented business owners, creditors, investors, attorneys and law firms, and myriad other stakeholders in the disposition of their troubled accounts.
From National Priority List Superfund Sites—to a decommissioned nuclear-powered aircraft carrier—to the pencils-on-the-desk—we handle it all, and we have successfully managed and generated Billions of Dollars for our global clientele in the conversion of their distressed assets to cash.
We specialize in handling the disposition of complex and highly-contentious special assets and special situations: Environmentally Impaired Real and Moveable Property (Superfund and Brownfields Sites), Hospitality, Gaming, Resorts, Shipyards/Admiralty/Maritime, Aviation (Fixed and Rotor), Automotive (Manufacturing and Retail), Heavy Industrial, Oil & Gas/Minerals, Commercial and High-Value Residential Real Estate. No business is too small or too large for EDS.
The process of an Assignment for the Benefit of Creditors
The basic process in an Assignment for the Benefit of Creditors is that the business (Assignor) turns over its assets, both real and moveable, to an independent third-party neutral (Assignee [EDS]) who is the responsible fiduciary for divesting the assets and settling with creditors.
An Assignment for the Benefit of Creditors is a voluntary and arms-length transaction that provides a speedy, orderly disposition and equitable liquidation of the firm’s assets and subsequent distribution to its creditors. It is similar to a Chapter 7 liquidation process but is far quicker and much less expensive and, therefore, generally derives a larger distribution to all creditors.
EDS experts marshal on-site 24/7/365 throughout the nation to secure and operate troubled accounts facing operational or financial challenges. Our experts work diligently with all stakeholders to preserve, protect, maintain, and enhance the enterprise value of the business and business assets that might otherwise be lost during costly and fruitless bankruptcies.
Assets Held in Trust: By operation of law, all assets are held in trust upon acceptance of the Assignment. These assets and the funds realized therefrom are protected against creditor claims. The assets are then liquidated, and the proceeds, less administrative expenses, are distributed to all creditors according to their lawful priority class. The order of priority is very similar to that used by the Trustee in a bankruptcy proceeding.
Duties of the Assignee: The Assignee has similar duties to a Trustee in Bankruptcy. The Assignee is charged with acting in a business-like manner in the disposition of the assets. The Assignee has considerable flexibility in the methods used and does not have to obtain consent or have a hearing to ratify his or her actions.
Fees: Unlike Bankruptcy, no upfront fees are required. The fee amount is determined before signing the documents and becoming part of the General Assignment agreement. The fees for the Assignee are paid as an administrative expense from the proceeds recovered.
Advantages of an Assignment for the Benefit of Creditors or Creditor/General Assignment: An Assignment does not require court adjudication or consent in most states, nor does it require the consent of creditors. It does not have the stigma of bankruptcy and frequently benefits the company’s principals, who nearly always guarantee the lender obligations of the company. Because an Assignment avoids the administrative procedures that govern bankruptcy, there is a considerable reduction in the cost of disposition and the time necessary to sell the assets. The consequence is greater flexibility in divestiture methods and options, resulting in greater returns for creditors. An Assignment for the Benefit of Creditors is an option that should always be considered as an option to bankruptcy.
EDS’s unparalleled level of Assignment for the Benefit of Creditors Assignee expertise is recognized and appreciated nationwide. How may we be of service to you?