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About Assignment for the Benefit of Creditors

If bankruptcy is not the best option for your business or your business does not qualify for bankruptcy, but still needs to negotiate issues with debt, an Assignment for the Benefit of Creditors pursuant to Chapter 727 of the Florida Statutes may be the best option. An Assignment for the Benefit of Creditors or ABC begins with an Assignment from Assignor (the business or debtor) to an Assignee.

The Assignment is a contract and the Assignor turns over all assets and liabilities to the Assignee for liquidation for the benefit of creditors. The Assignee is a fiduciary to the creditors and is typically a professional liquidator. This proceeding is filed in a Florida Circuit Court where the assets of the business (the Assignor) are located.

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A Business Bankruptcy Alternative

An Assignment for the Benefit of Creditors is for businesses only. An ABC is a business tool, an insolvency that is governed by Florida state law, rather than by federal bankruptcy law. A business will opt for an ABC when it does not qualify for Chapter 7 bankruptcy or does not want to file for Chapter 11 bankruptcy because cash flow is insufficient to keep the business going.

Ways ABCs Are Used

A company can use an Assignment for the Benefit of Creditors to liquidate assets and collect receivables so that a distribution is available to allowed creditors of the company.

An ABC can also allow an interested party to purchase the business from the Assignee as a going concern.

The ABC Process in Florida

Chapter 727 of the Florida Statutes governs the ABC process in Florida. First, the Assignor (the distressed business) chooses an Assignee who liquidates the company's assets for the purpose of satisfying claims made by creditors. The Assignee is always an independent who owes a fiduciary duty to the company's creditors.

The Assignor and the Assignee then execute a statutory, written Assignment and the Assignor lists all known assets, all known creditors and their claims, and other company information. The ABC is filed in state court. Creditors can file claims in order to receive any distribution under the Assignment. The Assignee can sell the business or operate the business for a short time until it is sold or liquidated.

If you are interested in exploring the options of an Assignment for the Benefit of Creditors, contact our Miami ABC bankruptcy lawyer. As in many areas of the law, one size does not fit all for financially troubled companies.

Call the capable team at Orshan, P.A. today if you want to learn more!

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