ABCs Are Quick & Less Expensive

When considering a company bankruptcy, an Assignment for the Benefit of Creditors presents an attractive option. Because there is no court supervision, liquidating assets through an assignment for the benefit of creditors can save substantial time and money.

In a piecemeal liquidation, the bankruptcy trustee must expend time and money to employ an auctioneer, obtain approval to pay the auctioneer, obtain approval to incur the expenses to conduct an auction, provide notice to creditors, and comply with numerous other legal requirements. This can delay the process and incur added administrative expenses, including legal fees. Additionally, because of delays in a Chapter 7 Bankruptcy, rent expense is incurred due to the continued occupancy of business premises. The rent is paid before the unsecured creditors.

Under an Assignment for the Benefit of Creditors, it’s possible to avoid many of these delays and expenses. Moreover, unless exceptional circumstances exist, the Assignee under an ABC is able to distribute cash to creditors within seven to eight months after the General Assignment is commenced. By contrast, a Chapter 7 Bankruptcy Trustee will not commence distributions to creditors in a company bankruptcy until after all assets have been liquidated, legal processes for court orders permitting the allowance and disallowance of claims has been completed, and he or she is authorized by the court to do so—a process often taking two years or more.

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