Despite what you may have heard, bankruptcy is not your only option if your business is struggling to pay its bills. And as a Chicago, Illinois bankruptcy attorney, the Law Office of Thomas W. Drexler wants to ensure you understand all your options if your company is in serious financial trouble.
So that you can make the best decision for your business, we’ll review what’s known as an assignment for the benefit of creditors. As you read, keep in mind that details of the law differ from state to state, and since our expertise is as a Chicago, Illinois bankruptcy attorney, we’ll focus on the process as it plays out in the state of Illinois.
Overview of an Assignment for the Benefit of Creditors
When someone decides to use this tool as an alternative to bankruptcy, they execute a contract in which the struggling business assigns-or transfers-ownership and control of its assets to a third party in trust. The business assigning ownership is known as the Assignor and the third party is known as the Assignee.
A key distinction from bankruptcy to point out here is that the business has the option to choose who the third party will be. This is not the case in bankruptcy.
Once the assets are assigned to the assignee, the assignee liquidates the assets of the company and applies the proceeds of that sale to the Assignor’s debts, based on Illinois state law.
The Benefits of An Assignment for the Benefit of Creditors
One of the main benefits of this contract is that it enables troubled business owners to relieve themselves of their business debts without the expense and complication of bankruptcy. In fact, the entire business may be liquidated without the need for court supervision. This allows you to spend more of the liquidation proceeds to pay off creditors which reduces your exposure if your debts are secured by a personal guaranty.
Also, unlike during a bankruptcy, the assignee may continue to operate the business and attempt to sell it as a going concern.
Learn More from a Chicago, Illinois Bankruptcy Attorney
As mentioned, an assignment for the benefit of creditors is not bankruptcy. But that doesn’t mean you don’t need a professional attorney to help guide your business through the process. To learn more about this process and how The Law Office of Thomas W. Drexler can help you navigate it, give us a call at 1-312-726-7335.