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Assignment for the Benefit of Creditors
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Bankruptcy a Concept to be Understood:
I think it is very important to first understand the exact meaning of the word bankruptcy. Bankruptcy means incapacity of a firm, person etc to repay the funds borrowed. Many a times we read in newspapers, magazines etc that a company is not able to repay the loans borrowed and has declared itself bankrupt. The nonpayment of the funds borrowed can be due to any reason like the huge accumulated losses in the balance sheet of the company etc.
Whatever is the reason, it is certain that the creditors of the company that declares itself bankrupt have to face hard times as it is not sure whether they would get their money back or not even after the intervention of the court. It should be noted here that for declaring itself bankrupt, a company, firm, person etc has to file a petition in the court of law and the court will decide whether declaring bankruptcy is the only way or there is any other alternative with the company left. Also, it has been observed that many a times a company declares itself bankrupt despite the fact that there is no need to do so. That is why, the intervention of the court is necessary in declaring oneself bankrupt. The question that haunts everybodys mind is that what happens to the company etc after bankruptcy Is there not any other alternative to bankruptcy What are the procedures that are followed after bankruptcy is declared We shall discuss these all in our next parts of discussion.
Is it Prossible to get the Money back:
As is well known to us that there are many creditors of any firm that supplies various types of goods and services to the firm, company etc. When any firm, company etc declares itself bankrupt; the money that is owed by the company to the various creditors has to be paid back. When the bankruptcy is declared, there is an intervention of the court and it sees that all the creditors of the bankrupt company get their
maximum amount of money lent back. This is possible only when there is a special person etc appointed by the court that decides the priorities etc in paying back the money. This is actually what happens when a company becomes bankrupt. The other question that comes into the mind of the reader is that how it is possible for the court to arrange for the payments of the various creditors of the bankrupt firm, company etc. Actually, the money is realized by selling the assets of the company and from the proceeds, the various creditors are paid back the sum as per the priority that is based upon many factors. Let us discuss how the creditors can get their money back from the firm, company etc that has been declared bankrupt.
The General Assignment:
Let us see, what is the actual procedure that is adopted by the court in paying back the money of the various creditors of the bankrupt firm. It is very important for us to first understand what is general assignment It is the term that is used in relation with the Bankruptcy law. There are of course different laws of bankruptcy in different countries and the meaning of the term general assignment may take different meanings. But the overall broad concept is almost the same. If a person in living in the United States, the meaning of the term general assignment can easily be understood in the following context: As per the Bankruptcy law, the general assignment in the United States means a contract. The firm, company or the person that has been declared bankrupt is known as the Assignor. It can also be called as the insolvent. In order that the creditors can get their money back and that too in a very fair and transparent manner, as per the U.S law, the Assignor has to transfer the legal and the equitable rights as well as titles to the third party that is called as Assignee. Apart from the legal rights, the custody and the control over the property and other assets are also transferred to the assignee. All this is done so that the various assets of the assignor can be sold and the creditors can get the proceeds as per the various priorities. These priorities are set by the law and the whole process too takes place as per the various directions and regulations of the law. All this is done so that the creditors can get the money back. The concept of general assignment is essentially the same in almost all the countries. The assignment is thus done for the benefit of the creditors and it is a very well established tool. This can also be understood as an alternative to the bankruptcy. Thus, by means of general assignment, the various affairs of the insolvent company are settled in less time with minimum expenditure. The assets of the insolvent company are easily sold after an assignment is made and the creditors feel at ease when the assignment is made. Also, they do not have to spend any fee towards the various legal procedures. Such legal procedures are time consuming and costly too. Thus, the assignment is beneficial for all the parties. Now the question arises here is that who can make an assignment The answer to this question is that any person who is a debtor can easily make an assignment. The debtor can be a person; a partnership firm or even can be a company or a corporation. Thus, any debtor can make an assignment. The only requirement is that the debtor should be having property or assets in its or his name. In the common practice, a person does not generally do the assignment. This is because a company can easily receive discharges as compared to an individual. Thus, it can be rightly said that the general assignment is an alternative to the bankruptcy and it should be used rather than going for bankruptcy. If the bankruptcy has been declared, by general assignment, the interests of the various creditors of the bankrupt are taken care of.
So, Assignment Beneficial for all:
After going through the above article, it can be rightly said that the assignment is beneficial for all the parties. The creditors of the company etc get their money and the insolvent is discharged of his obligations towards the various parties. The assignment can also be used as an alternative to bankruptcy and any company, firm etc that intends to declare itself bankrupt, should think about the assignment.
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