High Ridge Partners, LLC

 THE "ABCs" of ABCs.

An assignment for the benefit of creditors, commonly called an ABC, is a state law alternative to a bankruptcy case in federal court.  Although it is similar to Chapter 7 liquidation, an ABC usually does not require judicial administration.  It is less time consuming and less expensive than liquidating under the supervision of a bankruptcy court.

One of the more significant advantages of an ABC is that the principals of the business may select the assignee entrusted to liquidate the company and pay creditors.

An assignment for the benefit of creditors is a transfer, or assignment, of legal and equitable title to all of a business’s property to an assignee, also referred to as the “assignee-trustee.” The assignee acts as a fiduciary to all creditors.  The assignee has authority to liquidate the business’s assets, settle its affairs and distribute proceeds equitably to creditors. The transfer of assets is subject to all prior liens and the assignee is bound to honor those liens.

The assignment or transfer of the business’s property is accomplished through a trust agreement.  The principals of the business, as authorized by appropriate board resolutions or written authority from the shareholders, execute the trust document and assignment instrument.  Almost immediately after the assignment is effected, the assignee-trustee issues a notice to all creditors of the assignment.  The notice advises all stakeholders of the status of the business and its assets and assures the stakeholders that an orderly liquidation is under way. It also invites them to file a proof of claim.

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