What Happens During an ABC

Santa Monica, California Assignment for the Benefit of Creditors Representation Lawyers

Unlike traditional bankruptcy proceedings, in an assignment for the benefit of creditors ("ABC") transaction, there are distinct differences that must be considered in order to understand if this form of debt relief is the right choice for your business.

At Weintraub & Selth, we can help you make that decision by presenting you with clear information and careful analysis to see how we can help you get your struggling business back on its feet. To learn more about ABC and how it might be of benefit to you, contact us today to speak with one our qualified California debt relief lawyers.

Below are some important points about how ABC's work:

• In many states, including California, an ABC does not give rise to an automatic stay from creditors, like bankruptcy. However, an assignee can often block judgment creditors from attaching assets because the assets no longer belong to the corporation and are now under the direct control of the assignee. We can help you determine if this is the best path for your business to take and how to navigate it smoothly.

• The making of a general assignment for the benefit of creditors is typically considered a default under most contracts. As a result, before assets are assigned to the assignee, we can help you disclose and discuss this impending action with creditors to try and resolve outstanding claims before an assignment takes place.

• In order to preserve a right to compensation in an ABC claim, a creditor must generally to the assignee proof of claim by a stated deadline or bar date, similar to bankruptcy. This also involves claims made by internal creditors, not just outside vendors, customers, etc. For instance, unpaid employees and other claim priorities are governed by state law and may involve different amounts than apply under the Bankruptcy Code. In California, for example, the employee wage and salary priority is $4,300, not the $10,950 amount currently in force under the federal Bankruptcy Code. Employee claims may take priority over other outside creditors such as a supplier or vendor.

• Likewise, generally, California ABC statutes do not have a provision similar to that under the federal Bankruptcy Code, which gives an administrative claim priority to outside vendors who sold goods in the ordinary course of business to a debtor during the 20 days before a bankruptcy filing. As a result, these vendors may recover less in an ABC than in a bankruptcy case, subject to assertion of their reclamation rights. We can help you prioritize your creditors and execute a plan that takes all known creditors into account.

• Unlike what happens in a bankruptcy filing, there generally is no cap imposed on a landlord's claim for breach of a real property lease in an ABC. There is however, more room to negotiate the terms of the lease. We can assist you with these dealings.

• In many states, including California, sales by the assignee of the company's assets are completed as a private transaction without required approval of a court. However, unlike a bankruptcy sale, there is usually no ability to sell assets "free and clear" of liens and security interests without the consent or full payoff of lien holders or creditors. Likewise, leases or executory contracts cannot be assigned without required consents from the other contracting party. We can help you negotiate with a lessor to resolve these types of issues.

Los Angeles Business Debt Relief Attorneys

For more information: To discuss assignment for the benefit of creditors with one of our Los Angeles attorneys, call 310-584-7702, 866-572-2423 (toll free) today or complete the contact form on this website. Se habla español.