Assignments for the Benefit of Creditors

Assignments for the Benefit of Creditors

Assignment for the benefit of creditors is one of the ways to liquidate or sell assets of a failed business, or a business no longer viable under state law.  The assignment is a contract where the assignor or business owner turns over all assets and liabilities to the assignee so that the assets can be sold to pay creditors. The assignment contract transfers the debtors legal title to the property and assets to the assignee.  The assignee is often a professional liquidator and will have authority to liquidate the debtor’s (business owner’s) property and distribute the proceeds to creditors.

An assignment for the benefit of creditors is similar to a bankruptcy liquidation of a business under Chapter 7.  The assignment case is filed in a Florida Circuit Court and depends on where the assets of the business and business owner are located.  The duties of the assignee are similar to the duties of a bankruptcy trustee.  However, unlike bankruptcy cases, there is no general automatic stay in assignments.

“In Florida, only secured creditors and mortgagees can commence proceedings against the assignee.”

The assignment statute also allows for the assignee to operate the business for limited periods, if it is in the best interest of the assignor.  This enables the assignee to sell the business as an operating business, if possible, to obtain more value to pay creditors.

The assignee is required to publicly notice the assignment in a newspaper published in the county where the petition is filed, and any other counties where it is required.  This must be done once a week for four consecutive weeks, within 10 days after filing.  Claims must be submitted by creditors within 120 days from the date of the filing.

Florida law prioritizes claims to be made by the assignee as follows:

• Secured creditor claims
• Administrative Claims/Fees
• Governmental Unsecured Claims
• Wages/Compensation Claims

It is important to remember that every business is unique.  The circumstances surrounding the ability of a business to pay their debts, the total assets of the business, the likelihood that the business will be viable in the future need to be taken into account when deciding the best way forward.

Under Florida law, businesses have options when they can no longer pay their debt.  An attorney can help guide you and your business to determine whether bankruptcy, assignment for benefit of creditors or other financial and legal options make sense to eliminate debt and remain a viable business.

We can help you determine if Assignment for the Benefit of Creditors makes sense for you and your business, and the next steps to relieve your financial difficulties.  Our attorneys have many years of experience assisting clients in Florida Bankruptcy and business financial resolution.  Contact us today to schedule a free consultation

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