General Assignment for the Benefit of Creditors: 

An Alternative to Bankruptcy.


A General Assignment for the Benefit of Creditors is a voluntary and "arms length" transaction which provides a speedy, orderly and equitable liquidation of the firmís assets and subsequent distribution to its creditors.It is similar to a Chapter 7 liquidation process, but is far quicker and much less expensive and therefore generally derives a larger distribution to all creditors.

The basic process in a General Assignment ("Assignment") is that the business (assignor) turns over its assets to a third party (assignee) who is responsible for liquidating these assets and settling with creditors.

The Assignee marshals the assets of the business, liquidates physical assets such as machinery, equipment, furniture, etc. and collects accounts receivable. A pro rata distribution is then made to unsecured creditors of any or all monies remaining after all priority parties such as secured lenders, lien holders, etc. have had their interest satisfied. 

Assets Held in Trust

By operation of law all assets are held in trust upon acceptance of the Assignment.  These assets and the funds realized therefrom are protected against creditor claims. The assets are then liquidated and the proceeds, less administrative expenses, distributed to all creditors according to their lawful priority class. The order of priority is very similar to that used by the Trustee in a bankruptcy proceeding. 


Duties of the Assignee

The Assignee has similar duties to a Trustee in Bankruptcy. The Assignee is charged with acting in a business-like manner in disposing of assets.  The Assignee has considerable flexibility in the methods used and does not have to obtain consent or have a hearing to ratify his or her actions.


Unlike Bankruptcy, no up front fees are required. The fee amount is determined before the documents are signed and becomes part of the General Assignment agreement.  The fees for the Assignee are paid as an administrative expense from the proceeds recovered.

Advantages of a General Assignment

A General Assignment does not require court adjudication or consent in California and many other states, nor does it require the consent of creditors. 

It does not have the stigma of Bankruptcy and frequently benefits the company's principals who nearly always guarantee lender obligations of the company.

Because a General Assignment avoids the administrative procedures that govern bankruptcy there is a considerable reduction of the cost of liquidation and the time necessary to sell assets. 

The consequence is that there is greater flexibility in liquidation methods and options with resulting greater returns for creditors.

A General Assignment is an option that should always be considered when liquidation is the only remaining course of action.


Home ] Distressed Businesses ] Venture Capital Principals ] Investment Bankers ] Asset Preservation in Acquisitions ] [ General Assignments ] General Assignments FAQ ] Who We Are ] Contact Us ] New Page 1 ]