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Assignments for the Benefit of Creditors and Receiverships

DSI has been an industry leader in acting as both Assignee for the Benefit of Creditors and as receiver for over thirty years.

While similar to a liquidation under Chapter 7 of the Bankruptcy Code, an assignment for the benefit of creditors is subject to state and relevant common law instead of federal law. An assignment for the benefit of creditors works as a liquidation tool because the assignment of all of the assets of a company to a fiduciary for the benefit of creditors provides for an efficient, orderly and equitable distribution to companies with the assignment taking the property out of the reach of the company’s individual creditors. Assignments do not serve as a discharge of the company’s obligations and to that extent are not to be viewed as a reorganization of the company’s estate.

Assignments for the Benefit of Creditors provide parties with an interesting alternative to a bankruptcy proceeding where the parties’ primary goal is designed to liquidate and distribute assets. While the tasks and responsibilities for the assignee are similar to those of a bankruptcy trustee, outcomes can be brought about more efficiently and effectively through an assignment.

Receiverships provide an additional, interesting alternative to a bankruptcy proceeding. In those instances where a lawsuit has been commenced and the plaintiff has legitimate concerns regarding the protection of underlying assets, a court may be asked to transfer control over the assets to a receiver. In many respects similar to the functions performed by a chapter 11 trustee, the receiver will be expected to protect the collateral, preserve property and care for the distressed assets pending resolution of the litigation.

DSI has considerable experience acting as both assignee and receiver and is able to advise parties in interest whether a bankruptcy proceeding or an assignment for the benefit of creditors or appointment of receiver would be the appropriate vehicle to manage the dissolution of a debtor’s estate or provide appropriate protection of  assets.