– Assignment for the Benefit of Creditors
Not all businesses require the expense and complications that can be involved in filing for bankruptcy. Assignments are commenced by formally transferring most, if not all of a business’ assets to an assignee, in trust, to apply the property or its proceeds to the payment of debt and to return any surplus to the debtor. Illinois Bell Telephone Co. v. Wolf Furniture House, Inc., 157 Ill.App.3d 190, 509 N.E.2d 1289, 109 Ill.Dec. 277 (1st Dist. 1987).
Like in bankruptcy, the assignee in an assignment for the benefit of creditors assumes the general responsibilities of a trustee in bankruptcy. Further, similar to Chapter 7 bankruptcy cases for corporations, partnerships, and/or Limited Liability Companies, assignments will not discharge assigning debtors from any of their debts or liabilities unless the assets are sufficient to pay claims in full. Therefore, assignments are generally used to liquidate debtors who no longer wish to continue operations. In addition, the assignee acquires only the debtor’s title to the assigned assets. Such property may be subject to preexisting liens, claims, and encumbrances that remain valid against the assignee. In re Mossler Co., 239 F. 262 (7th Cir. 1917).
Please contact our office if you would like to discuss if an assignment for the benefit of creditors is a viable solution for your needs.
Similar to a consumer bankruptcy, a corporate Chapter 7 bankruptcy can eliminate all of a corporation’s debts by a complete liquidation of assets.
Chapter 11 is a reorganization proceeding, typically for corporations or partnerships. Individuals, especially those whose debts exceed the limits of Chapter 13, may file Chapter 11.
In Chapter 11, the debtor usually remains in possession of his assets and continues to operate any business, subject to the oversight of the court and the creditors committee.
The debtor proposes a plan of reorganization which, upon acceptance by a majority of the creditors, is confirmed by the court and binds both the debtor and the creditors to its terms of repayment. Plans can call for repayment out of future profits, sales of some or all of the assets, or a merger or recapitalization.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.