General Assignment for the Benefit of Creditors

Frequently Asked Questions

Who can execute a General Assignment for the Benefit of Creditors?
Almost anyone. However the Assignee will generally only accept a corporation or a partnership.

Why would anyone choose a General Assignment instead of a Bankruptcy?
A Bankruptcy is a lengthy procedure and very costly. It generally requires a substantial "up front retainer" and also requires court approval and notices for most if not all major decisions. An Assignment is less costly and the Assignee fees are paid out of the proceeds. The process is much quicker and usually results in greater recoveries for creditors.

Does it require creditor consent?
No, a General Assignment does not require creditor consent.

Does my secured lender have to consent?
Yes.  The Assignee will generally contact the secured parties to obtain their consent.

What if the principals have guaranteed credit?
A guarantee obligation stands on its own. It is generally not eliminated either by Bankruptcy or by an Assignment for the Benefit of Creditors. However, since an Assignment generally results in greater recoveries, the guarantor stands to benefit.

Do I as a principal have any input or control over the proceedings?
From a legal standpoint you do not.  However, often the Assignee will either employ the principals to assist in the liquidation process or consult with them as necessary and appropriate.

What if the Assignor wants to rescind the Assignment?
Once the documents have been executed a trust is automatically in place and the Assignee cannot rescind the agreement.

What is required to conclude a General Assignment?
An agreement executed by a responsible party(s) of the corporation, ratified by a corporate resolution and an executed acceptance by the Assignee.  In California and some  other states the Assignor is required to provide a certified copy of all amounts owed by the corporation with contact names and addresses.

What happens to the corporate or partnership assets?
The corporation is divested of all its assets at the time of the execution of the documents and the Assignee will marshal all assets, then cause them to be liquidated as quickly as possible. Separate bank trust accounts are set up for each case. Administrative costs are paid on an ongoing basis and distribution to secured parties and priorities are made as quickly as possible. Unsecured creditors are required to file their claims within the statutory period of 180 days.

Can the corporation be sold as a "going concern"?
The Assignee will consider this possibility and can conclude any sale that benefits the General Assignment estate. The assets only can be sold not the actual corporation or its stock.

How long does the process take?
This depends upon the type of case and the ability to liquidate assets quickly. The statutory claim period usually dictates the time period because of the requirement to carefully screen and process all claims. This process  (after the statutory time period) may take several months,  but most cases do not exceed twelve months from start to finish.    A case can normally be concluded in approximately twelve months.

What do I need to do to review the General Assignment option?
Simply call us. We will respond immediately and will assist in your review.

 

 
 

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