What Is an Assignment for the Benefit of Creditors and How Does It Differ From a Bankruptcy?
An assignment for the benefit of creditors (ABC) is a process by which a financially distressed company (referred to as the assignor) transfers its assets to a third-party fiduciary (referred to as the assignee). The assignee is responsible for liquidating those assets and distributing the proceeds to the assignor’s creditors, pursuant to the priorities established under applicable law. From the perspective of a creditor, there are many important distinctions between an ABC and a bankruptcy case. Key Issues Noncourt Supervised ABCs. Unlike a bankruptcy, which is governed by federal law, an ABC is based on state law. ABCs are court supervised […]