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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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