A Fast, Low-Cost Alternative to Bankruptcy
As with all debt relief options, the strengths and weaknesses of assignments for the benefit of creditors must be carefully reviewed before choosing that course of action. While this option has obvious strengths, including its speed and low cost, it also has weaknesses not obvious at first glance.
How Assignments for the Benefit of Creditors Work
Under the California Assignment for the Benefit of Creditors statute, an individual or business is able to transfer assets to an assignee. The assignee can then conduct a sale of those assets and distribute the earnings to creditors, following priorities outlined in by statute. The present owner of the assets sold is often involved with the buyer of the assets.
Is This the Best Bankruptcy Alternative?
At The Lobel Firm, L.L.P., our attorneys refuse to leave our clients in vulnerable positions. For that reason, we tend to recommend against assignments for the benefit of creditors. In a Chapter 11 bankruptcy, when the bankruptcy court decides that the sale of an asset is acceptable, the sale, including the price paid for the assets, generally cannot be attacked after the sale is completed. When an asset is sold by an assignee, the sale can be attacked. For example, creditors can claim that the asset was not sold for a high enough price. These claims can lead to litigation that is often best avoided.
However, our experience has taught us that a careful examination of all alternatives is necessary before moving forward. In some cases, this process may truly make sense. In those cases, we will do everything possible to see that the process goes smoothly.
To discuss assignments for the benefit of creditors in California with one of our lawyers, call 949-791-9642 or contact us via e-mail.
