A general assignment for the benefit of creditors is an efficient out-of-court alternative to corporate bankruptcy for many businesses. General assignments often provide our clients with superior results when compared to corporate bankruptcy, and are generally the preferred method of liquidation for both our debtor clients and creditor clients alike.

General assignments are created by state law and are very different than corporate bankruptcy proceedings in a federal bankruptcy court. In a general assignment, the debtor/assignor corporation selects an assignee to unwind the corporate business and take control of the assets and liabilities of the company. Once the assignee is appointed and the assets and liabilities of the company are transferred, then the corporate management team, investors, and board members of the company are free to move on with other opportunities. Any personal liability of the corporate management team and its directors is removed after the assignment of assets and liabilities occurs.

How does a General Assignment for the Benefit of Creditors Work?

• The debtor/assignor company signs an agreement with the assignee transferring all assets and liabilities to the assignee, which fulfills the role of an independent trustee in the transaction.
• The assignee in its capacity as trustee has a fiduciary relationship with creditors and monetizes the assets of the company for distribution to the company’s creditors. Additionally, the assignee has the flexibility to run the business as a going concern if operating the company will maximize its value.
• Secured creditors of the debtor/assignor are distributed any assets from the sale of collateral securing their debts, allowing them to forego the expensive and time-consuming process of foreclosing on the collateral.
• Unsecured creditors are allowed to file proofs of claim with the assignee to be paid pro-rata distributions of any amounts owed them by the debtor/assignor.

Advantages of General Assignments for the Benefit of Creditors:

• An assignee is chosen by the officers of the debtor company, as opposed to a bankruptcy trustee appointed by the bankruptcy court.
• Assignments are generally less expensive than bankruptcy proceedings and can be completed over a much shorter period of time, often without court approval.
• Assignments are less formal than bankruptcy proceedings and most actions by the assignee can be accomplished without court appearances or approval. This level of speed and efficiency greatly increases the probability that the assets of the company will be monetized for the greatest value.