“A lender, however, should not rule out a bankruptcy alternative as it may provide a speedier and less costly solution to a troubled situation.” Assignment for the Benefit of Creditors An Assignment for the Benefit of Creditors (ABC) is a process where the borrower’s assets are transferred to a third-party neutral known as an “assignee.” The assignee then carries out the liquidation of the assets and administers a claims process. It is very similar to a Chapter 7 bankruptcy but without the same formal structure and oversight. An ABC is a creature of state law and the amount of court oversight and regulation varies from state to state. Missouri has both statutory and common law ABCs. Common law ABCs have little to no court oversight. Whether statutory or common law, the operative document in an ABC is the assignment agreement. The assignment will often times specify the various duties of the assignee. Additionally, an ABC does not necessarily prevent litigation going forward against the assigning entity and can serve as a basis for an involuntary bankruptcy. To the extent collateral is involved, the assignee will often work with the lender, including getting the use of cash collateral. One of the primary benefits of an ABC is that it allows for a more flexible liquidation of assets that may not be possible in a bankruptcy or receivership liquidation. Conclusion While not all of the bankruptcy alternatives will be a good fit for a particular situation, the lender should consider its options and balance the various benefits and risks of each for a particular situation. Indeed, bankruptcy proceedings may still remain the best option. A lender, however, should not rule out a bankruptcy alternative as it may provide a speedier and less costly solution to a troubled situation. ■ Spencer Fane attorney Eric Johnson is the co-practice group leader for the Banking and Financial Services Group and practice group leader for the Bankruptcy, Restructuring, and Creditors’ Rights Group. He can be reached at ejohnson@spencerfane.com. CAUGHT YOU LOOKIN’! CONTACT US TODAY! 801.676.9722 sales@thenewslinkgroup.com Your Customers Are Too. Advertising Space Available. QR Code: website /#ad-space The Show-Me Banker Magazine | 15
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