Assignment for the Benefit of Creditors
Helping Florida business owners exit gracefully and move on with less time and hassle than bankruptcy
An assignment for the benefit of creditors (ABC) is one way for an insolvent company to wind down its operations in an orderly fashion. Like a Chapter 7 business bankruptcy, an ABC involves selling the company’s assets and using the proceeds to pay off creditors, but without the stigma of a bankruptcy on their credit report or the mind of the public.
The business attorneys at Edelboim Lieberman Revah have successfully helped many South Florida companies with an assignment for the benefit of creditors. Learn more about ABCs below, and call Edelboim Lieberman Revah in Miami or Fort Lauderdale to find out if an ABC is right for you.
How does an ABC work?
The owner of the company (the assignor) makes an assignment, or transfer, of company assets and debts to another company or law firm (the assignee). The assignee is then responsible to sell the assets and use the proceeds to pay off the creditors. By using an ABC, the assignor gets to move on quickly from the insolvent company without having to personally go through the process of liquidating assets and paying creditors or going through the Chapter 7 bankruptcy process.
ABCs Under Florida Law
Unlike a Chapter 7 bankruptcy, which takes place in federal bankruptcy court and is supervised by a federal bankruptcy trustee, ABCs are filed in and supervised by the Florida state courts. Florida Statutes Chapter 727 governs an assignment for the benefit of creditors.
Following are some important points about the way ABCs operate in Florida:
- ABCs must be in writing. Florida statutes provide a sample form of assignment; the ABC should be in substantially the same form.
- An ABC represents an irrevocable assignment.
- The assignee files the assignment with the court, publishes a notice of the assignment as required by law and also notifies creditors of the assignment.
- In certain situations, the assignee can carry on the business for a period to maximize return.
- The assignee can reject an unexpired lease.
- The assignee can hire professionals as needed, such as accountants, appraisers, auctioneers, and attorneys, to assist in the liquidation of assets.
- The assignee can examine the validity and priority of claims and litigate disputed claims.
- The assignee can sue to enforce claims the assignee may have by virtue of the assignment or assign a cause of action to another party.
- The assignee must file interim and final reports with the court.
- Any monies left over after creditors are paid goes back to the assignor.
Is an ABC better than bankruptcy?
An ABC liquidates assets and winds down business operations similar to a Chapter 7 bankruptcy, and an ABC is conducted under court supervision like Chapter 7. However, an ABC can offer advantages over Chapter 7 in many instances. Importantly, an assignee typically gets a greater return when selling assets since the assignee is frequently knowledgeable about the industry and is often a skilled and experienced negotiator. Additionally, an assignee can continue to run the business as a going concern for a while and even sell it as such, which a bankruptcy trustee won’t do.
ABCs also offer more privacy to the assignor, as opposed to going through the public court filings of a bankruptcy. And the ABC is faster for the assignor. The assignor makes the assignment and is done, rather than going through bankruptcy which can take months or years depending on the assets to be liquidated.
On the other hand, an assignor does not get the benefit of the automatic stay afforded by bankruptcy, which might encourage a company to file for bankruptcy instead. Yet one could argue there is no reason a creditor would go after an assignor after the ABC has been executed, knowing the assignor no longer has assets. Generally speaking, ABCs are usually a less litigious process than Chapter 7 for businesses.
Is an ABC right for me?
If you have racked up a large amount of debt with a lot of different creditors and you see that your business is not going to make it, an assignment for the benefit of creditors might be the smart move. Especially if you have a large number of assets, liquidating the business to pay off your creditors can take months or even years. An ABC lets you transfer all your assets and debts at once, allowing you to move on immediately while the assignee takes on the burden of handling the liquidation and paying off creditors.
Since there are pros and cons to both Chapter 7 bankruptcy and ABCs, and there may be other unexplored alternatives as well, the best thing to do is sit down with an experienced business bankruptcy attorney to analyze your situation and look at all your options, so you can choose the best path forward that makes sense for you.
Get Help Today With an Assignment for the Benefit of Creditors in Miami and South Florida
For help with an Assignment for the Benefit of Creditors or other aspects of business bankruptcy in South Florida, contact Edelboim Lieberman Revah at their offices in Miami and Fort Lauderdale by calling 305-768-9909 for a no-cost, confidential consultation.