An Alternative to Business Bankruptcy
If you are the owner of a failed or struggling business that has more debts than assets, you may think a long and costly bankruptcy proceeding is your only option. In California, you have another option: assignment for the benefit of creditors, or ABC.
At the law firm of Weintraub & Selth, APC, our lawyers offer the full range of debt relief options, from debt negotiation, to debt restructure, to assignment for the benefit of creditors, to bankruptcy. Our lawyers serve business owners across the United States, Los Angeles, Santa Monica, the San Fernando Valley, South Bay and surrounding communities in southern California.
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.
What are the Advantages of an Assignment for the Benefit of Creditors?
Through an ABC, your assets can be immediately sold by the assignee to you or someone else free of creditor claims and the proceeds quickly distributed to your creditors. An ABC sale can take place simultaneously with the transfer of the assets to the assignee, creating a turn key situation for the new business and the entire process typically can be wrapped up in less than a year.
While ABCs and bankruptcies each have their unique strengths and benefits, an ABC is often less expensive than a bankruptcy proceeding. Business bankruptcy filings usually involve large retainer fees and extensive oversight by the bankruptcy court, though creditor claims can be paid over time from the restructured business' cash flow. ABC's on the other hand, usually require lower up front fees and have no court involvement, but payment of the purchase price (for creditor claims) usually must be made in a lump sum.
All types of companies can make an assignment for the benefit of creditors, including LLCs, partnerships and corporations.
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) or complete the contact form on this Web site. Se habla español.
