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GENERAL INTRODUCTION TO ASSIGNMENT FOR BENEFIT OF
CREDITORS
Presentation to California State Bar & Financial Services Committee
February 14, 2012
Barry V. Freeman
Partner
Jeffer Mangels Butler & Mitchell LLP
Michael L. Joncich
Adjustment Bureau Manager
Credit Management Association
Presented by
©2012 Jeffer Mangels Butler & Mitchell LLP. All Rights Reserved
8/3/2019 General Introduction to Assignment for Benefit of Creditors
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Overview of ABCs
What is an ABC?
General overview/common law ABCs California vs.
statutory provisions. How does it differ from Chapter 7 Bankruptcy?
± No automatic stay
± No ability to assume/reject contracts/leases
± No governmental supervision
± More flexible
± Faster administration
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Debtor selects assignee/qualifications?
Who may be an assignee
How to choose the assignee What are fiduciary obligations of assignee?
To whom are they owed?
How to document the assignment/when is it
effective?
Overview of ABCs (continued)
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Mechanics/administration of ABCs
Landlord's rights to evict are limited (Civil Code1954.1) 90 day rights of occupancy
Attachments void and dissolved (CCP 493.030) if
obtained within 90 days of ABC Inventory of assets/appraise same/determine market
and method to maximize value
Evaluate liens. Assignee takes subject to liens andmay not avoid same, unless avoidable as a
preference. Assignee, however is a "lien creditor"under the UCC trumping unsecured creditors
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Asset liquidation options
Continuation of business/how financed/liability of assignee?
Insider issues and tort/derivative claims in favor of the assignee
Insider sales/friendly foreclosure/how to meetfiduciary duties/how to avoid challenges
Meetings of creditors are rare
Notice to creditors within 30 days of the assignment Claims filing date, not less than 150 or greater than180 days from the date of giving notice (CCP 1807)
Mechanics/administration of ABCs (continued)
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Professionals Hired By Assignee
Who is chosen
What is necessary
Carveouts What is the cost of the ABC/ compared to cost of
bankruptcy, Chapter 11 and informal workout?
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How To Deal With Claims/Priority Claims
Taxing agency consent to sell assets/IRS
Joint sale by assignee and secured creditor
Joint foreclosure sale using assignee as agent of secured party
Upon sale by secured party it transfers all rights of debtor to purchasers and discharges prior liens UCC9617
UCC 9627(c) deems sale by assignee commercially
reasonable Is title better through an assignee?
Sale by assignee protects and insulates securedcreditor
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Recovery of Prefences/Fraudulant Conveyances
(CCP 1800)
Assignee can bring preference suit (challenged by
Ninth Circuit)
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Questions? Comments?
Barry V. Freeman
[email protected] L. Joncich
Please contact us!
