Assignments for the Benefit of Creditors is roughly the equivalent of Chapter 7 Bankruptcy. It is a liquidation of assets. Similar to the workout it is voluntary and non-binding on the creditors. There is no automatic stay and costs tend to be less expensive than a court proceeding.

In an Assignment, the debtor usually wants to go out of business and provide for an orderly liquidation of its assets. Therefore a meeting of creditors is usually not conducted. The creditors are contacted by the debtors' attorney or an agent the debtors' attorney has contracted with to liquidate the assets and if they agree, receive their pro rata distribution from the liquidation of the assets. Since an Assignment is a voluntary agreement, the debtor receives no formal discharge of its debts unless the creditors agree to furnish a declaration that the debt has been satisfied upon receipt of their distribution payment.

Assignments and workouts are generally administered by third parties. Several affiliates of the National Association of Credit Management operate Adjustment Bureaus to handle these orderly reorganizations and liquidation's. The third party assumes control of the operation and runs the business for the benefit of the creditors thus ensuring that the creditors realize maximum value.

One of the other benefits, in addition to reduced costs, of participating in a workout or assignment is that unlike court proceedings there are no fixed time schedules or rules. Bankruptcy is composed of rules and schedules whereby certain documents and events must either be filed or take place. In an assignment or workout there are no constraints. This gives the third party an opportunity to get as much money as possible for the assets being liquidated without the appearance of a distressed sale.

THE PRECEDING IS GENERAL INFORMATION ONLY!

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