Is The Assignment For Benefit Credits An Alternative To Filing For Chapter 7 Bankruptcy?
An Assignment for Benefit of Creditors is a state court liquidation proceeding with different statutory requirements and procedures than applicable in a bankruptcy case for business entities to wind down their financial affairs. Assignments for benefit of creditors continue to be popular business liquidation alternatives for the orderly liquidation of corporations, limited liability companies, and non-profit corporations and general partnerships. Although individuals are eligible to file assignment for benefit of creditors, there is no discharge granted to individuals in an Assignment case thus individuals rarely choose this relief.
The expectation of the parties is that liquidating a company through an assignment case is that the process will proceed more efficiently than other federal alternatives, like bankruptcy. The liquidator or the assignee is skilled in the process and can promptly obtain appraisals for assets, schedule public sales, and distribute funds to creditors in a more streamlined fashion the United States Trustee’s office oversees the administration of the case by a Chapter 7 trustee. Trustees must follow more stringent procedures implemented by the Office of the United States Trustee. Providing a distribution to creditors can be a more cumbersome process since the reporting is more onerous. the requirements of noticing the sales can be more time-consuming. Finally, the structure of how the trustees and their counsel are paid result in a smaller distribution to creditors.
In New Jersey, an assignee receives a 20% commission on funds received through liquidation of property. On the surface, that may seem like a high percentage. However, assignees have no need to retain counsel in many cases. They simply liquidate assets because they are professionals and attorneys familiar with local administrative and legal procedures.
Overall, an Assignment for Benefit of Creditors case generally receives less publicity than a bankruptcy court filing and this may be a consideration by the company in selecting a remedy.
Is Corporate Dissolution An Alternative To Filing Chapter 7 Bankruptcy?
Corporate Dissolution is a remedy where individuals who are owners of a company reach a decision to voluntarily close the business. The business may have some debt, or it may have reached the point where the individual has realized that operating in a pandemic or in other circumstances is simply unprofitable. In New Jersey, corporations can proceed with a voluntary dissolution by action of their corporate shareholders. Also, they can take action through their Board of Directors followed by a shareholder vote, or obtain dissolution under New Jersey Business Corporation Act by written consent of shareholders depending the provisions set forth in the Certificate of Incorporation.
There are multiple steps in a corporate dissolution. In a business where the directors are the sole shareholders, unanimous consent of the voting shareholders is often an efficient way to dissolve. New Jersey requires tax clearance before you can dissolve your corporation and filing of specific forms with the NJ Department of Treasury. An application for tax clearance certificate, and also a final estimated tax return are part of the dissolution process.
Corporate Dissolution is a remedy for small businesses that are not encumbered with significant debts and no personal guarantees. Usually, the wind down of the corporation prior to formal dissolution can repay sales tax or other non-dischargeable tax debt. Business owners who desire to avoid the formal process of a Chapter 7 Bankruptcy filing when some or most debts may be paid through the liquidation process informally undertaken by the owners of the company themselves.
For more information on Assignment For Bankruptcy, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (908) 373-8500 today.