Assignments for the Benefit of Creditors 

Advantages and Disadvantages of Assignments

While business owners may also simply walk away from a failing business, this does nothing to protect the business's owners or investors. An assignment allows for the opportunity to pay off creditors and to obtain orderly estate administration. An assignee may often be able to sell an asset for a greater price or pursue litigation that a bankruptcy trustee is unable to pursue. Secured creditors consenting to assignment eliminate the costs and litigation associated with the foreclosure and sale of an asset. An assignment may generate less publicity than that of bankruptcy.

There is limited court oversight involved in an assignment, and the automatic stay that prevents creditors from collecting on debts during the pendency of a bankruptcy case does not apply to an assignment case. If the business is not satisfied with the assignment case, it can still file for voluntary bankruptcy. As well, creditors may seek to impose an involuntary bankruptcy under Chapter 11 if they are not satisfied with how the assignment case is proceeding.

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