Secured creditors — banks, equipment lenders, SBA loan holders — have rights in an ABC that are different from unsecured creditors. Understanding how the assignee handles secured claims determines whether the ABC goes smoothly or results in litigation.
How Secured Claims Are Handled
A secured creditor with a perfected security interest in specific assets is paid from the proceeds of those assets — before any other creditors. The assignee must identify all secured creditors, verify the validity and perfection of their liens, and liquidate the collateral. If the collateral sale proceeds exceed the secured debt, the excess flows to the general estate. If they fall short, the deficiency becomes an unsecured claim.
Secured creditors cannot simply foreclose without the assignee’s involvement. Once the assignment is made, the assignee holds title to all assets — including collateral. Secured creditors who want to foreclose on collateral must coordinate with the assignee. In most cases, the assignee sells the collateral cooperatively, which produces better results than a unilateral foreclosure sale.
The California ABC System gives business owners and creditors the exact tools, templates, and step-by-step guidance to navigate an Assignment for Benefit of Creditors — faster and cheaper than bankruptcy, without a federal court filing. Request your free evaluation here.
California ABC System — Assignment for Benefit of Creditors 
Leave a comment