04 Jun Statement of Financial Affairs: Question 6
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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