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ABC – Assignment for the Benefit of Creditors

Assignment for the Benefit of Creditors (“ABC’) is an alternative to a chapter 7 corporate or LLC
bankruptcy. An “ABC” is filed in a state court of Florida including in Broward, Miami-Dade and
Palm Beach County.

The option of an assignment for the benefit of creditors should be analyzed by comparing a chapter
7 corporation bankruptcy. A chapter 7 business bankruptcy is filed in the United States Bankruptcy
Court. A chapter 7 trustee is appointed to take possession and liquidate the assets of the business.
The trustee is selected randomly from a panel of approved chapter 7 trustees. The trustee will
investigate any fraudulent transfers or preferences including benefits paid from the business to any
of its principals or their relatives. The trustee often will aggressively pursue recovery against
these transferees which can be a major disadvantage for filing any corporate bankruptcy. A
bankruptcy does include an automatic stay that prevents consensual secured creditors (mortgages)
from seizing property without bankruptcy court provision.

In an assignment for the benefit of creditors, (ABC), the business entity enters an agreement to
transfer all of its assets to the liquidator. The liquidator is selected by the business-it is not
randomly assigned by a court. The corporation or LLC assigns its assets to this liquidator, the
assignee in a pre-arranged agreement. This assignment is filed with the state court. Assets can
include cash in the bank, physical assets including inventory, accounts receivable, and intellectual
property. The assignee sells these assets to pay creditors. The assignee can continue the
business for a limited time to sell the business as a going concern, if possible. All creditors are
notified of the assignment in this state court case and can file a claim in the state court. As in
bankruptcy, the statute lists priorities for which creditors are entitled to be paid before general
unsecured creditors from the funds collected.

Contact Jeffrey Solomon to assist with analyzing the options of filing a chapter 7 bankruptcy or an
assignment for the benefit of creditors or the choice of just closing the doors.

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