Assignment for Benefit of Creditors - Types, Trust Law, Creation, Deficiency, Legality Of Assignments
debtor property money journal
The voluntary transfer of all or most of a debtor's property to another person in trust so that he or she will collect any money that is owed to the debtor, sell the debtor's property, and apply the money received to the payment of the debts, returning any surplus to the debtor.
The debtor is the assignor, the transferor; and the person who takes legal title to the property is the assignee.
FURTHER READINGS
Buckley, Mike C., and Gregory Sterling. 2003. "What Banks Need to Know about ABCs." Banking Law Journal 120 (January): 48–58.
Kupetz, David S. 2001. "Assignment for the Benefit of Creditors: Exit Vehicle of Choice for Many Dot-Com, Technology, and Other Troubled Enterprises." Journal of Bankruptcy Law and Practice 11 (November-December): 71–82.
Additional Topics
In some jurisdictions, a partial assignment is considered a fraudulent conveyance because the creditors are hindered and delayed in receiving payment if they must seek payment from the debtor after first being referred to the assignee. Other jurisdictions treat any assignment by a solvent debtor as fraudulent on the theory that such an arrangement prevents the immediate sale of the property so tha…
Since preferences are permissible under common law, a common-law assignment for the benefit of creditors that provides for preferential payments to designated creditors is not a fraudulent conveyance. Most courts have held that debtors cannot use preferences to obtain discharges from creditors by conditioning preferences on their release from unpaid portions of their debts. To do so is considered …
Most states have enacted statutes that regulate assignments for the benefit of creditors. Some states require that an assignment must comply with statutory requirements or be invalid, while in others the debtor may make a common-law assignment, which is regulated by common law, or a statutory assignment, which is controlled by applicable statutes. The state statutes require that the assignment be …
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