When Creditors Engage With an ABC: Rights Once the Assignment Is Made

Business owners make the ABC, but creditors are the primary beneficiaries. Understanding creditor rights once an assignment is made helps creditors participate effectively and protect their interests.

Creditor Participation Rights

Creditors have the right to: receive notice of the assignment, file claims, attend any creditors’ meeting, review the assignee’s accountings, and object to the assignee’s actions in superior court. A creditor who believes the assignee is mismanaging assets, paying improper fees, or favoring certain creditors can petition the court for oversight.

The assignee’s fiduciary duty runs to all creditors equally. An assignee who favors one creditor over another — by settling a claim at above-market value, paying fees to insiders, or otherwise preferring certain parties — has breached their fiduciary duty. Creditors who identify these issues and document them have standing to bring the assignee into court.

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. Request your free evaluation here.