FAQs of ABC vs. Bankruptcy

A One-way Street?
A One-way Street?

The difference between Bankruptcy and Assignment for the Benefit of Creditors can be confusing and raise questions.  Here are the most common areas of confusion:

1. What are the advantages of the ABC (assignment for benefit of creditors) over a simple bankruptcy?

  • The General ABC is faster and less expensive
  • ABCs can generate greater asset values and subsequent recoveries for creditors
  • Business decisions can be made without court approval
  • Assignees can move quickly to maintain asset values

2. What is Management’s (the Assignor) involvement in an ABC?

  • It is limited to execution of the ABC agreement with board/shareholder ratification
  • Control is surrendered to the Assignee
  • The Assignee may at its discretion turn to Management for assistance with valuations and recoveries

3. What is the status of the Corporation during the ABC?

  • The Corporation is divested of all assets once the ABC is signed
  • The Assignee takes control and ownership of assets pending resolution of any claims and liens

4. How are unsecured creditors affected by an ABC?

  • Unsecured creditors stand outside the ABC decision process
  • Unsecured creditors have 180 days to file proof of claims
  • Distribution of any funds occurs 60-90 days later

5. How are secured creditors affected?

  • Secured creditors must consent to the ABC process and any asset dispositions

6. How long will the ABC take to complete?

  • Each case is unique, depending up the complexity of claims, research involved, and any pending litigation.  Properly administered and managed by those professionals at Real Estate Matters Solutions, most situations are resolved within the calendar year.

Real Estate Matters Solutions works with both both private and public companies, providing expert asset valuation and strategic management of business challenges for all parties.

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