An Alternative to Chapter 7 Bankruptcy Some businesses cannot continue to operate and must therefore be sold or liquidated and the proceeds distributed to creditors. An Assignment for the Benefit of Creditors is a well-established common law tool that is an alternative to bankruptcy. General Assignments are structured to save time and expense in concluding the affairs of an insolvent company. Through a General Assignment, the insolvent company's assets can be sold quickly and efficiently, and the liquidation proceeds can be distributed to creditors shortly thereafter. Secured creditors frequently find a General Assignment useful, because the secured creditor is relieved of the legal costs and risks associated with the foreclosure and sale of its collateral. Unfortunately, many attorneys automatically put financially troubled debtors into bankruptcy under Chapter 7 of the Bankruptcy Code without exploring alternatives. A decision is best made when all possible avenues are thoroughly explored and discussed beforehand. More times that not, the expensive and time consuming bankruptcy process can be avoided by employing CMA's expertise in liquidating over 1,000 publicly and privately held company's over the past 75 years.
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In Order to Preserve Value Goodwill may be a significant asset whose value can be realized only through a "turn-key" sale to someone already interested in purchasing the assignor's business. Where a buyer has been located who is willing to pay more than the distressed liquidation value of the debtor's assets, and the debtor is looking for a vehicle to effect a quick sale to the buyer free and clear of liens and encumbrances, an assignment can keep the assignor's assets in place for a period of time to consummate the sale. An assignee may also operate a business for a short period of time in hopes of locating a buyer for purposes of selling the company as a going concern, and/or conduct an orderly liquidation of the debtor's assets that would maximize the value over a straight public auction. A Chapter 7 Trustee has no incentive to undertake this type of extra work or spend the time and money required seeking court approval to pursue this type of turnkey sale. |
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Q. What are the assignee's fee for administering a General Assignment? A. The compensation paid to the assignee can be negotiated between the assignor and assignee depending on the size of the case, and is always spelled out in the contract of assignment. The assignee typically collects its fee from the dollars it receives from the liquidation of the assets. Since the assignee's fee is a percentage of the dollars it collects from the liquidation assets, the assignee has an incentive to maximize the recovery for all creditors. |
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