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ASSIGNMENT FOR BENEFIT OF CREDITORS

assignment for benefit of creditors michigan

Simon PLC Attorneys & Counselors – October 2020 Memorandum

Bloomfield Hills, Michigan – An assignment for benefit of creditors (“ABC”) is an alternative to formal bankruptcy proceedings and is governed by state law (N.B. ABC statutes and laws vary from state to state.   There is minimal case law regarding ABCs, and most of the reported decisions are over one hundred years old.   This article is based upon Michigan’s ABC statute and the author’s practical experience.)   An ABC involves a voluntary transfer or assignment of all the debtor’s assets to a third party chosen by the debtor.  The third party, termed an ‘assignee’, then liquidates the assets in accordance with the assignment statute.  There is minimal court supervision, although the assignee is required to periodically report to the Court and must give notice of the assignment to the creditors of the debtor.    

Although both receivership and an ABC involve liquidation of assets under court supervision, a receivership is often imposed by a creditor on an unwilling debtor.   In contrast, an ABC is a voluntary process.   Another key difference is that while the choice of a receiver is subject to the discretion of the court, the assignee is chosen by the debtor.

An ABC allows a debtor to efficiently liquidate its asset while at the same minimizing costs associated with multiple creditors attempting to either block a sale or seize an asset.   The assignee is empowered to operate a business as a going concern, terminate burdensome contracts and promptly liquidate assets.   This can maximize value and allow for efficient administration.

Also, any sale of the assets can be approved by the court, thereby giving buyers the comfort that the sale will not be collaterally attacked later.   ABCs are also more flexible and less costly than a bankruptcy proceeding.

Common Questions

While an ABC is not a universal solution, it can provide a quick and efficient exit strategy from a difficult situation.   Furthermore, an ABC allows for operation of a business as a going concern. This is especially helpful in cases involving hotels, bars, restaurants, gas stations, and apartment buildings, or if the asset has greater value as a going concern.

Please contact Simon PLC Attorneys and Counselors if you would like advice on how to put an ABC to use for you as a debtor, or creditor, or as an alternative to bankruptcy or receivership.

N.B. Not Legal Advice: Please contact us if you would like to discuss the facts and circumstances of your specific matter. Simon PLC Attorneys & Counselors expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this memorandum. The information contained herein may not reflect current legal developments and is provided without any knowledge as to the recipient’s location, industry, identity or specific circumstances. No recipients of this content, clients or otherwise, should act, or refrain from acting, on the basis of any content included in this memorandum without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the jurisdiction for which the recipient’s legal issue(s) involve. The application and impact of relevant laws varies from jurisdiction to jurisdiction, and our attorneys do not seek to practice law in states, territories and foreign countries where they are not properly authorized to do so.

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assignment for benefit of creditors michigan

Assignments for the Benefit of Creditors: Michigan

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  • 1 Commencing an ABC Proceeding
  • 2 Selecting an Assignee
  • 3 Duties and Actions of the Assignee
  • 4 Administration of the ABC
  • 5 Creditor Claims
  • 6 Compensation of Assignee and Professionals
  • 7 Closing the ABC
  • 8 Jurisdiction and Power of the Court
  • 9 Bankruptcy Considerations
  • 10 Other Topics

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In re Body Contour Ventures, LLC  (Bankr. E.D. Mich. 2019) (aesthetic medicine)

In re Plasco Tooling & Engineering Corporation  (Bankr. E.D. Mich. 2017) (aerospace)

In re General Products Corporation  (Bankr. E.D. Mich. 2016) (automotive)

In re DRS Household Services  (Bankr. E.D. Mich. 2015) (home health care company)

In re SSI Technology, Inc.  (Bankr. E.D. Mich. 2014) (defense industry)

In re Latex Foam International, LLC  (Bankr. D. Ct. 2014) (mattress manufacturer and retailer)

In re Community Memorial Hospital a/k/a Cheboygan Memorial Hospital  (Bankr. E.D. Mich., Northern Division, 2013) (health care facilities)

In re W.T. Harvey Lumber  (Bankr. M.D. Ga. 2012) (local hardware store chain)

In re Thriftco, Inc., et al . (Bankr. W.D. Ky. 2010) (local hardware store chain)

In re Eurway, Inc.  (Bankr. N.D. Tx. 2009) (regional furniture store chain)

In re The Estate of the Assignment for the Benefit of Creditors of Edward Paul May, Debtor  (Bankr. E.D. Mich. 2008) (Ponzi scheme)

In re TI Acquisition, LLC  (Bankr. N.D. Ga. 2008) (carpet manufacturer)

In re Lucre, Inc.  (Bankr. W.D. Mich. 2006) (telecommunications services)

In re Daniel Broucek aka Pupler Dist. Co.  (Bankr. W.D. Mich. 2006) (Ponzi scheme)

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assignment for benefit of creditors

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Assignment for the benefit of the creditors (ABC)(also known as general assignment for the benefit of the creditors) is a voluntary alternative to formal bankruptcy proceedings that transfers all of the assets from a debtor to a trust for liquidating and distributing its assets. The trustee will manage the assets to pay off debt to creditors, and if any assets are left over, they will be transferred back to the debtor. 

ABC can provide many benefits to an insolvent business in lieu of bankruptcy . First, unlike in bankruptcy proceedings, the business can choose the trustee overseeing the process who might know the specifics of the business better than an appointed trustee. Second, bankruptcy proceedings can take much more time, involve more steps, and further restrict how the business is liquidated compared to an ABC which avoids judicial oversight. Thirdly, dissolving or transferring a company through an ABC often avoids the negative publicity that bankruptcy generates. Lastly, a company trying to purchase assets of a struggling company can avoid liability to unsecured creditors of the failing company. This is important because most other options would expose the acquiring business to all the debt of the struggling business. 

ABC has risen in popularity since the early 2000s, but it varies based on the state. California embraces ABC with common law oversight while many states use stricter statutory ABC structures such as Florida. Also, depending on the state’s corporate law and the company’s charter , the struggling business may be forced to get shareholder approval to use ABC which can be difficult in large corporations. 

[Last updated in June of 2021 by the Wex Definitions Team ]

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IN RE ASSIGNMENT FOR THE BENEFIT OF CREDITORS OF UNISON CORP

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Assignment for Benefit of Creditors Lawyers

(This may not be the same place you live)

  What is an Assignment for the Benefit of Creditors (ABC)?

An assignment for the benefit of creditors, or “ABC”, is a type of out of court settlement mechanism for dealing with debt. In most cases, when a company is going out of business, they will usually opt for either business bankruptcy or liquidation (selling off remaining assets). With an assignment for benefit of creditors, the company hires an “ABC” company to help them liquidate their assets for them in one consolidated procedure.

The benefits of the liquidation sales go to the creditors, while the ABC company takes a percentage of the sale profits as their fee. This basically makes the entire procedure faster than a regular, piece-by-piece liquidation of assets. It also takes much of the burden off of the company and business owners, who may already be pressed for time and resources.

Who Would Benefit Most From an Assignment For Benefit of the Creditors?

An assignment for the benefit of creditors works particularly well for smaller corporations and LLC’s. These smaller organizations might not be equipped for a full business liquidation procedure, which can take months or even years to fully complete. Instead, with an ABC, the company assigns (transfers) all of their assets, including the debt, to the ABC organization. At this point, the business owners can move forward while the ABC group takes care of the details of the liquidation process.

Are There Any Legal Issues Associated With An Assignment For Benefit of Creditors?

An assignment for benefit of creditors needs to be done with the consent of the creditors. Also, the ABC company will likely need to create a contract with the debtor regarding the process and procedure for the assignment. These steps can be fairly complex and may require the assistance of a lawyer. In some cases, disputes may arise. For instance, if the ABC company violates their own contractual duty to liquidate the assets, then litigation may be required.

Lastly, in some cases, the debtor might remain personally liable on some of the debt even after it has been assigned or transferred to the ABC company. This can have all kinds of effects on the business’ legal rights, as well as their credit and other factors. Thus, it’s important that the debtor fully understand their rights and responsibilities prior to entering into an assignment for benefit of creditors.

Overall, going the ABC route is generally faster and actually more profitable for the debtor in the long run than filing for bankruptcy or undergoing liquidation by themselves.

Do I Need a Lawyer For Help With An Assignment For Benefit of Creditors?

An assignment for the benefit of creditors can be a complex procedure and can involve a large amount of debt and assets. It may be in your best benefits to hire a business lawyer in your area if you need assistance with an ABC or other similar issues. Your attorney can provide you with legal research and advice in relation to the process, since business laws may differ by state. Also, if you need to attend any court meetings, your lawyer can provide you with legal representation during those times.

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Schafer and Weiner, PLLC Files Assignment for Benefit of Creditors

John Stockdale, Jr. filed an automotive repair shop located in Detroit, Michigan for an assignment for the benefit of creditors (“ ABC ”) in Wayne County Circuit Court.  An ABC is a state court proceeding similar to a receivership or Chapter 7 bankruptcy case.  Through the ABC, the assignee anticipates liquidating the business’s assets, contesting many merchant cash advance claims, and distributing the proceeds to creditors.

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General Assignments for the Benefit of Creditors: The ABCs of ABCs (5th Edition)

November 30, 2021.

We are pleased to announce that the General Assignments for the Benefit of Creditors: The ABCs of ABCs (5 th Edition) is available at the ABI Store now. This book was written by DSI’s Senior Managing Director, Geoffrey L. Berman, with editing provided in part by DSI’s Steven L. Victor.

With more than 40 years working on Assignments, Geoff brings an abundance of information to help navigate key issues as the state legislatures are reviewing, and in many instances revising their laws governing ABCs and receiverships.

Click here to find out more information about this book .

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IMAGES

  1. S 202 63 Assignment for Benefit of Creditors View Document Form

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  2. Assignment Creditors Form

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  3. Fillable Online Assignment for the Benefit of Creditors of: PROOF OF

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  4. Form PC578

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  6. General Assignments for the Benefit of Creditors: The ABCs of ABCs (5th

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COMMENTS

  1. ASSIGNMENT FOR BENEFIT OF CREDITORS

    01. Oct. Simon PLC Attorneys & Counselors - October 2020 Memorandum. ASSIGNMENT FOR BENEFIT OF CREDITORS. Bloomfield Hills, Michigan - An assignment for benefit of creditors ("ABC") is an alternative to formal bankruptcy proceedings and is governed by state law (N.B. ABC statutes and laws vary from state to state.

  2. Assignments for the Benefit of Creditors: Michigan

    A Q&A guide to an assignment for the benefit of creditors (ABC) in Michigan. This Q&A addresses the process by which assignments are generally administered in Michigan, including the commencement and administration of the ABC, the duties and actions of assignees, creditor claims, and the jurisdiction of the court. Answers to questions can be compared across a number of jurisdictions (see ...

  3. Bankruptcy, Restructuring and Creditors' Rights

    Varnum ensures that clients have access to the full resources of the firm to meet their objectives. Varnum's Restructuring, Insolvency and Creditors' Rights lawyers represent troubled companies as well as financial stakeholders in troubled companies. This includes investors, creditors, owners, acquirers, customers, suppliers and many other ...

  4. Section 600.5201

    Section 600.5201 - Common law assignments for the benefit of creditors; requirements for validity; bond of assignee; filing; approval; attachment or execution on assigned property; acknowledgment; inventory (1) All assignments commonly called common law assignments for the benefit of creditors are void unless the same are without preferences as between such creditors and are of all the ...

  5. Assignment for the Benefit of Creditors: Effective Tool for Acquiring

    An assignment for the benefit of creditors (ABC) is a business liquidation device available to an insolvent debtor as an alternative to formal bankruptcy proceedings. In many instances, an ABC can be the most advantageous and graceful exit strategy. This is especially true where the goals are (1) to transfer the assets of the troubled business ...

  6. PDF Revised Judicature Act of 1961 (Excerpt) Chapter 52 Assignments for The

    ASSIGNMENTS FOR THE BENEFIT OF CREDITORS 600.5201 Common law assignments for the benefit of creditors; requirements for validity; bond of assignee; filing; approval; attachment or execution on assigned property; ... Rendered Tuesday, November 29, 2022 Page 1 Michigan Compiled Laws Complete Through PA 227 of 2022 Courtesy of www.legislature.mi ...

  7. Mich. Comp. Laws § 600.5201 :: CHAPTER 52 ASSIGNMENTS FOR THE BENEFIT

    2006 Michigan Compiled Laws - Mich. Comp. Laws § 600.5201 Common law assignments for the benefit of creditors; requirements for validity; bond of assignee; filing; approval; attachment or execution on assigned property; acknowledgment; inventory. ... Act 236 of 1961 600.5201 Common law assignments for the benefit of creditors; requirements for ...

  8. assignment for benefit of creditors

    Assignment for the benefit of the creditors (ABC)(also known as general assignment for the benefit of the creditors) is a voluntary alternative to formal bankruptcy proceedings that transfers all of the assets from a debtor to a trust for liquidating and distributing its assets. The trustee will manage the assets to pay off debt to creditors, and if any assets are left over, they will be ...

  9. Mich. Comp. Laws § 600.5205

    Michigan Compiled Laws. Chapter 600 - REVISED JUDICATURE ACT OF 1961. Subchapter - CHAPTER 52. ASSIGNMENTS FOR THE BENEFIT OF CREDITORS. Section 600.5205 - Property conveyed; general powers of assignee. Mich. Comp. Laws § 600.5205. Download . PDF. Current through Public Act 52 of the 2023 Legislative Session.

  10. CHAPTER 52. ASSIGNMENTS FOR THE BENEFIT OF CREDITORS

    Section 600.5201 - Common law assignments for the benefit of creditors; requirements for validity; bond of assignee; filing; approval; attachment or execution on assigned property; acknowledgment; inventory; Section 600.5205 - Property conveyed; general powers of assignee; Section 600.5211 - Specific powers of assignee

  11. Assignment for Benefit of Creditors: Alternative to Business ...

    For example, Delaware and New Jersey involve the courts but Georgia and California don't. Although states have different requirements, an assignment for benefit of creditors generally follows this procedure: 1. Your Business Votes to Approve the ABC. State law and your company's governing documents will determine.

  12. Chapter 52 Assignments for The Benefit of Creditors (600.5201...600

    2006 Michigan Compiled Laws - CHAPTER 52 ASSIGNMENTS FOR THE BENEFIT OF CREDITORS (600.5201...600.5265) REVISED JUDICATURE ACT OF 1961 (EXCERPT) Act 236 of 1961 Chapter 52 ASSIGNMENTS FOR THE BENEFIT OF CREDITORS : ... Michigan may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness ...

  13. PDF Shutterstock/Mikhail Mishchenko

    on state-specific content for a variety of topics and practice areas. This excerpt from the Assignments for the Benefit of Creditors (ABCs) State Q&A addresses the process by which assignments are generally administered, including the commencement of an ABC and the duties of assignees, in Delaware, Florida, Michigan, and New York.

  14. ABC: Assignments for the Benefit of Creditors

    But here we are talking about a type of business liquidation process in the United States known as an Assignment for the Benefit of Creditors ("ABC"). An ABC is governed by state law and has ...

  15. Assignment for the Benefit of Creditors: An Overview

    An assignment for the benefit of creditors ("ABC") is an alternative to a chapter 7 bankruptcy proceeding. As in a chapter 7, the debtor's assets are shepherded and liquidated for the benefit of the debtor's creditors. An ABC is governed by statute and can either be court-supervised or conducted out of court. In New York, an ABC is ...

  16. Assignment For The Benefit Of Creditors (ABC)

    Clients considering assignment for benefit of creditors, as well as court-approved assignees, trust DelCotto Law Group PLLC 's reputation and experience to help them manage the court-supervised liquidation process. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. We are a debt relief agency.

  17. Assignments for the Benefit of Creditors

    See Practical Issues in Assignments for the Benefit of Creditors, by Robert Richards & Nancy Ross, ABI Law Review Vol. 17:5 (2009) at p. 6 (listing state statutes). In some states, the statutory authority and common law can coexist. At its most basic, the ABC process involves the transfer of all assets by a financially distressed debtor (the ...

  18. In Re Assignment for The Benefit of Creditors of Unison Corp

    STATE OF MICHIGAN COURT OF APPEALS In the Matter of the Assignment for the Benefit of Creditors of Unison Corporation. REBECCA MACKAY, Successor Trustee of the JOHN A. MACKAY REVOCABLE LIVING TRUST, UNPUBLISHED February 23, 2001 Appellant, v MCTEVIA & ASSOCIATES, INC., Assignee for the Benefit of the Creditors of UNISON CORPORATION, No. 217385 Oakland Circuit Court LC No. 99-011866-CZ Appellee.

  19. Assignment for Benefit of Creditors Lawyers

    An assignment for benefit of creditors needs to be done with the consent of the creditors. Also, the ABC company will likely need to create a contract with the debtor regarding the process and procedure for the assignment. These steps can be fairly complex and may require the assistance of a lawyer. In some cases, disputes may arise.

  20. Mich. Comp. Laws § 600.5245

    Michigan Compiled Laws. ... Subchapter - CHAPTER 52. ASSIGNMENTS FOR THE BENEFIT OF CREDITORS. Section 600.5245 - Assignee; accounts; reports; completion of duties; extension of time; notice. Mich. Comp. Laws § 600.5245 ... It shall be the duty of the assignee to close his trust if practicable within 1 year from the date the assignment is ...

  21. Corporate Insolvency

    John Stockdale, Jr. filed an automotive repair shop located in Detroit, Michigan for an assignment for the benefit of creditors ("ABC") in Wayne County Circuit Court. An ABC is a state court proceeding similar to a receivership or Chapter 7 bankruptcy case. Through the ABC, the assignee anticipates liquidating the business's assets, contesting many merchant cash advance claims, and ...

  22. ABC: Assignments for the Benefit of Creditors

    But here we are talking about a type of business liquidation process in the United States known as an Assignment for the Benefit of Creditors ("ABC"). An ABC is governed by state law and has long been viewed as an alternative to a liquidation under Chapter 7 of the US Bankruptcy Code. Although the ABC process has existed for more than a ...

  23. General Assignments for the Benefit of Creditors: The ABCs of ABCs (5th

    November 30, 2021. We are pleased to announce that the General Assignments for the Benefit of Creditors: The ABCs of ABCs (5 th Edition) is available at the ABI Store now. This book was written by DSI's Senior Managing Director, Geoffrey L. Berman, with editing provided in part by DSI's Steven L. Victor.

  24. Assignment for Benefit of Creditors

    Assignment for Benefit of Creditors. When: Apr 12, 2024 from 01:00 PM to 03:00 PM (CT) Download to Your Calendar. Contact Us. (312) 450-6600. [email protected]. Uniform Law Commission. 111 N. Wabash Avenue, Suite 1010. Chicago, Illinois 60602.