An assignment for the benefit of creditors (ABC) is a business liquidation device available to an insolvent debtor as an alternative to formal bankruptcy proceedings. In many instances, an ABC can be …
Assignment for the Benefit of Creditors: Effective Tool for Acquiring and Winding Up Distressed Businesses
In Brief
- An assignment for the benefit of creditors (ABCs) can be a viable alternative to Chapter 7 and Chapter 11 bankruptcy proceedings, which can be slow and inflexible.
- ABCs offer certain advantages, especially in situations where an acquiring party will not be taking on the unsecured debt of the distressed entity, or where fast action is needed to capture value from the liquidation of the assets.
- Generally, various statutory provisions must be followed which provide that certain claims should receive priority status over general unsecured claims, but the order of priority may not be clear.
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