During the pandemic response, Lakelaw remains fully operational with our lawyers and staff working both at the office and from home. We are consulting with our clients daily, negotiating and executing transactions, and counseling businesses who are formulating a plan for survival in the future. We are also participating in virtual court proceedings to the extent the same are conducted.
For some small businesses, bankruptcy is simply too expensive and too difficult. In Illinois, the Assignment for Benefit of Creditors is a good alternative.
In an Assignment, you decide that it is in your company’s best interest for an independent trustee to liquidate the company’s assets outside of court supervision. You assign all the company’s assets to this trustee. The trustee notifies all creditors and goes about collecting claims from the creditors. At the same time, the trustee – known as the assignee – starts the process of disposing of the assets of the company in the most efficient and effective way. Sometimes, the assignee will sell the assets as a going concern. Sometimes, the assignee will auction off the assets and close the business down. Sometimes, the assignee will simply transfer the assets to the secured creditor.
The assignee can also pursue claims which the company had against third parties. If the assignee recovers enough money to pay the creditors in full, any surplus can be paid to the company’s shareholders.
FREQUENTLY ASKED QUESTIONS – ILLINOIS ASSIGNMENTS FOR THE BENEFIT OF CREDITORS
Why should my company consider an Assignment for the Benefit of Creditors instead of Bankruptcy?
∫In an assignment for the benefit of creditors, there is no court involvement. There is no trustee in bankruptcy involved in an assignment for the benefit of creditors. You get to select who will serve as assignee for the benefit of creditors. You don’t get to select who might serve as your company’s bankruptcy trustee. Assignments for the benefit of creditors may be substantially less expensive than a chapter 11 bankruptcy case. You can frequently achieve many of the same benefits of a chapter 11 bankruptcy case through an assignment for the benefit of creditors with substantially less expense.
How can an Assignment for the Benefit of Creditors Help Me?
You may be able to form a new group of investors who can buy the assets of your existing company for a reasonable price. You may be able to make a deal with your existing lender or a new lender in order to facilitate this process. Your new group might be able to carry on a business very much like the business of your old company free from the burdens of debt which the old company might not have been able to pay.
You might also be able to liquidate the assets of your company for a substantially greater amount than could be realized in a forced liquidation or bankruptcy sale. This could greatly reduce your exposure to a secured lender on a personal guaranty.
By avoiding bankruptcy, an assignment for the benefit of creditors avoids the costs of administration of a bankruptcy trustee.
How do I select an Assignee for the Benefit of Creditors?
There are many people who have effectively served as Assignee for the Benefit of Creditors. Lakelaw’s attorneys have personal and professional relationships with all of them. So we can help you select an assignee with experience in cases just like yours. Our relationships allow for smooth administration in your assignment.
What is Lakelaw’s role in an Assignment for the Benefit of Creditors?
We sometimes will serve as the attorney for the assignor – your company. If there is no conflict, we might end up serving as attorney for the assignee – assisting the assignee in the process of liquidating your assets. This varies on a case-by-case basis. In each case, you make the decision after we inform you of all the facts you need to make it.