Assignments for the Benefit of Creditors (ABCs)

A Structured Alternative for Navigating Financial Distress

An assignment for the benefit of creditors (ABC) is a state-law process that allows a distressed organization to assign assets to an independent Assignee, who then administers them for the benefit of creditors outside bankruptcy court.

Boards, founders, sponsors, lenders, and creditors turn to an ABC as it is a faster, more private, more efficient, and cost-conscious alternative to Chapter 7 or Chapter 11.

Sherwood, an EisnerAmper company, can serve as Assignee to manage the process from asset transfer through final distribution, as the Assignee.

Evaluate an ABC or Wind-Down Strategy

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What Is an Assignment for the Benefit of Creditors? 

An ABC is a voluntary process in which an insolvent/distressed organization transfers their assets to the Assignee. The Assignee then takes legal title, monetizes assets, resolves claims, and distributes proceeds to creditors according to statutory priority.

Because ABCs are governed by state law, procedures, filing requirements, and creditor protections vary by jurisdiction. Legal counsel should confirm applicable requirements before proceeding.

ABC vs. Chapter 7 vs. Chapter 11 Bankruptcy

Consideration	ABC	Chapter 7	Chapter 11
Governing law	State law	Federal bankruptcy law	Federal bankruptcy law
Court involvement	Minimal to none, depending on the state	Court-supervised	Court-supervised
Speed	Generally faster	Moderate	Often lengthy
Cost	Generally lower	Moderate	Often higher
Privacy	Generally, more private	Public record	Public record
Control over process	Assignee selected by the organization	Trustee appointed by the court	Debtor typically remains in possession
Outcome	Liquidation with a structured wind-down	Liquidation	Reorganization or liquidation
Automatic stay on creditor actions	Not automatic; varies by state	Yes	Yes

When to Consider an ABC?

An organization, board, or sponsor may evaluate an ABC when facing:

Declining or lack of liquidity with no clear path to a sustainable capital structure
Pressure from secured lenders or key creditors to resolve obligations quickly
A need to wind down operations while preserving as much creditor and stakeholder value as possible
Reluctance to absorb the cost, public disclosure, or timeline associated with a bankruptcy filing
A sale or asset transfer opportunity that requires a clean, efficient transfer mechanism

ABCs are typically evaluated alongside bankruptcy, out-of-court workouts, receiverships, and other restructuring alternatives. The right path depends on the organization's facts, creditor base, and applicable state law.

How the Assignment for the Benefit of Creditors Process Works 

Each step is subject to state-specific requirements, so organizations should coordinate closely with legal counsel throughout the process.

Step 1

Assessment and Preparation

The organization, working with legal counsel and its advisors, evaluates whether an ABC fits its circumstances and prepares the required documentation and board or member approvals.

Step 2

Selection and Transfer

The organization selects an Assignee and executes an assignment agreement, transferring title to the organization’s assets.

Step 3

Administration and Monetization

The Assignee takes control of the assets, notifies creditors, and manages the sale or orderly wind-down of operations.

Step 4

Distribution and Closing

The Assignee resolves creditor claims, distributes proceeds according to statutory priority, and closes out the estate.

The Role of an Assignee for the Benefit of Creditors

The Assignee is the fiduciary at the center of an ABC. Once assets are transferred, the Assignee holds legal title and administers the estate for creditors, including asset sales, claims resolution, distributions, and final closeout.

Sherwood, an EisnerAmper company, can serve as Assignee and bring operational, financial, creditor-communication, and asset-disposition support to the process.

ABC and Business Wind-Down Services

Beyond serving as Assignee, Sherwood supports the activities of the ABC or when broader wind-down are required. The Assignee is responsible for:

Asset monetization, including intellectual property, equipment, and other organizational assets
Claims administration and creditor distributions
Structured wind-downs of operations, including employee and vendor matters
Stakeholder communication

Who We Support

Boards of directors and independent directors evaluating restructuring alternatives
Founders and management teams navigating a wind-down or asset transfer
Private equity and venture capital sponsors managing portfolio company distress
Secured and unsecured lenders assessing recovery options
Creditors seeking to understand or influence an ABC process
Financial and legal institutions working to protect stakeholder interests

Sherwood supports organizations across industries, from venture-backed startups to established enterprises.

Why EisnerAmper + Sherwood for ABC Matters

Focused experience. For more than 30+ years, Sherwood has concentrated on restructuring, ABCs, and fiduciary services.
Deep ABC knowledge. Sherwood has managed ABCs across a wide range of industries and organization sizes, guiding boards and management through the process with discretion and speed.
IP monetization capabilities. Sherwood helps identify, protect, and monetize intellectual property during corporate transition.
Boutique attention, national reach. As an EisnerAmper company, Sherwood pairs senior-level attention with the resources of a national accounting and advisory platform.

Frequently Asked Questions

What is an assignment for the benefit of creditors, and how does it work?

An ABC is a state-law process in which a distressed organization transfers its assets to an independent Assignee, who administers and monetizes those assets and distributes the proceeds to creditors.

How is an ABC different from Chapter 7 or Chapter 11 bankruptcy?

An ABC is governed by state law and generally involves less court oversight, lower cost, greater privacy than bankruptcy and can produce significant returns due to speed at which the Assignee can monetize the assets. Chapter 7 is a court-supervised liquidation; Chapter 11 is designed for reorganization or liquidation, with the debtor typically remaining in possession.

When might a board, founder, sponsor, lender, or creditor evaluate an ABC?

Common triggers include declining liquidity, lender pressure to resolve obligations, a need to wind down while preserving value, or a desire to avoid the cost and disclosure requirements of bankruptcy.

Who serves as the Assignee, and what fiduciary responsibilities does the Assignee assume?

The Assignee is an independent third party that takes legal title to the organization's assets and administers them for creditors, including asset sales, claims resolution, and distributions. Sherwood can serve in this role.

What happens to company assets, intellectual property, creditor claims, employees, and remaining operations?

The Assignee takes control of the organization's assets, including intellectual property, and manages sale or wind-down activities. Creditor claims are reviewed and resolved according to statutory priority, while employee and vendor matters are addressed as part of the wind-down.

How are assets marketed or sold, and how are creditor distributions administered?

The Assignee markets and sells assets to maximize recovery, then distributes proceeds to creditors according to the priority scheme established under applicable state law.

What is the next step to evaluate whether an ABC is appropriate?

Contact our team to assess the situation and determine whether an ABC or another restructuring alternative may be appropriate.

Related Services

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Managed Liquidations

Structured wind-downs, from initial planning through management of distressed assets to final distribution.

State and Federal Receiverships

Court-appointed receivership services that preserve assets during disputes and enforcement actions.

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Identifying, protecting, and monetizing IP to turn intangible assets into recovered value for creditors and stakeholders.

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A proactive diagnostic that helps an organization assess its financial and operational health before problems take hold, for organizations not yet in crisis.