What is Assignment for the Benefit of Creditors?
Assignment for the benefit of creditors is basically a quick, efficient out of court proceeding under which your business’s assets are transferred to a third party, called the assignee. The assignee sells the assets and distribute the proceeds to your creditors. One of the beauties of this process is that you are allowed to be the buyer of the assets, permitting you to buy back your business free of claims at a steep discount. In an ABC, your creditors file claims with the assignee and that is their only recourse provided the ABC is done correctly. Even if you buy back your businesses’ assets, your “new” business has protection from those claims. In other words, after making the assignment, your creditors are barred from filing claims against the new business, regardless of how much they receive from the ABC. An assignment for the benefit of creditors does not require the approval of creditors.
