Assignment for the Benefit of Creditors

Question 1

A debtor may transfer all of its property to a third partym who then…

Answer 1

sells the property for the benefit of creditors. This is an action authorized by the Virginia statute.

Question 2

What’s the purpose of the assignment for the benefit of creditors?

Answer 2

Facilitate orderly liquidation of an estate, e.g. an operating company that may be worth more if it is liquidated in a particular order.

Question 3

What is the effect of assignment on creditors?

Answer 3

Creditors cannot proceed against the property in the hands of the assignee because it is not the debtor’s property.

They must wait for the assignee to sell the property and get cash.

Question 4

What if the debtor continues to use the assigned property?

Answer 4

The assignment can be attacked as a fraudulent conveyance.