Statement of Financial Affairs: Question 6

04 Jun Statement of Financial Affairs: Question 6

This is the sixth in a series of blogs about the Statement of Financial Affairs and the questions it asks.

Question 6 of the Statement of Financial Affairs is a two-parter. The first part asks about “Assignments for the Benefit of Creditors,” and the second part asks about receiverships.

What is an “Assignment for the Benefit of Creditors”?

Many years ago, before the adoption of the modern bankruptcy code, there were few options for dealing with business debts that could not be paid. One was an “Assignment for the Benefit of Creditors” (“ABC”). An ABC occurred when the business voluntarily transferred most or all of its assets to another person in trust. The trust would collect any money owed the business, sell the business’s property, and pay off debt. If there was any money left over, it would be returned to the business.

Relatively rare today (a Chapter 11 usually makes more sense), any ABC made within 120 days of the date of filing must be disclosed. If your spouse made an ABC during this time and you’re filing a Chapter 12 or Chapter 13, the spouse’s ABC must be disclosed as well.

Question 6b deals with “Receiverships.” A Receivership, in its simplest terms, is an involuntary ABC. Typically appointed by the Court or pursuant to statute or regulation, a receiver has complete control over the conduct, operations and expenditures of a business. Recent examples are the appointment of receivers for failing banks by the Office of Thrift Supervision, or the appointment of a receiver for the Bernard Madoff assets. Occasionally, a receiver will be appointed in a domestic case to ensure payment of a domestic support obligation.

Any receivership within one year before the date of filing must be disclosed. If there was a receiver appointed for your spouse’s assets during this time and you’re filing a Chapter 12 or Chapter 13, the spouse’s receivership must be disclosed as well.

In the vast majority of individual cases, ABCs and receiverships will not be present.

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.
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