Frequently Asked Questions about Assignments for Benefit of Creditors
What is a General Assignment for Benefit of Creditors? A process where a troubled entity ( who is called the "Assignor") transfers property to a third party (who is called the "Assignee") in trust. Assignee acts as a fiduciary for the creditors by liquidating all assets and then distributing the proceeds to the creditors
Who can make a General Assignment for the Benefit of Creditors? Almost anyone. Indiana’s statute only says “A debtor who is in embarrassed or failing circumstances may make a general assignment of all the debtor's property in trust for the benefit of all the debtor's bona fide creditors.”
What does a General Assignment for the Benefit of Creditors do? It creates a process where the business is liquidated. It is not a process for rebuilding or reorganizing a business. Other legal processes exist for reorganizing a business. Until the questionnaire is completed and I have had time to review it, the question of what process is best for your case will remain open.
Why not file bankruptcy? The most recent changes to the Bankruptcy Code make bankruptcy more of a problem for companies in financial dire straits. A Chapter 7 bankruptcy has been the common solution for a company which is looking to liquidate due to financial problems while Chapter 11 was used to reorganize. While Chapter 11 was never simple or inexpensive, the costs and complexity of Chapter 7 increased last year. On the other hand, Assignments have no "automatic stay" like when a bankruptcy is filed to halt litigation against the assignor when an assignment is executed.
Why use a General Assignment for Benefit of Creditors? The process can move quicker than a bankruptcy. The process also has a simpler procedure than bankruptcy.
What happens after the creditor’s sign off on the Assignment? The Assignee takes over the property and liquidates the company. The creditors get paid according to the contract and that is the end.
Who can make a General Assignment for the Benefit of Creditors? Almost anyone. Indiana’s statute only says “A debtor who is in embarrassed or failing circumstances may make a general assignment of all the debtor's property in trust for the benefit of all the debtor's bona fide creditors.”
What does a General Assignment for the Benefit of Creditors do? It creates a process where the business is liquidated. It is not a process for rebuilding or reorganizing a business. Other legal processes exist for reorganizing a business. Until the questionnaire is completed and I have had time to review it, the question of what process is best for your case will remain open.
Why not file bankruptcy? The most recent changes to the Bankruptcy Code make bankruptcy more of a problem for companies in financial dire straits. A Chapter 7 bankruptcy has been the common solution for a company which is looking to liquidate due to financial problems while Chapter 11 was used to reorganize. While Chapter 11 was never simple or inexpensive, the costs and complexity of Chapter 7 increased last year. On the other hand, Assignments have no "automatic stay" like when a bankruptcy is filed to halt litigation against the assignor when an assignment is executed.
Why use a General Assignment for Benefit of Creditors? The process can move quicker than a bankruptcy. The process also has a simpler procedure than bankruptcy.
What happens after the creditor’s sign off on the Assignment? The Assignee takes over the property and liquidates the company. The creditors get paid according to the contract and that is the end.