New Jersey Assignment for the Benefit of Creditors

State Law Liquidation for Entities and Individuals

An assignment for the benefit of creditors ("Assignment" or "ABC") is a well-established state court-administered liquidation proceeding. An alternative to bankruptcy, an Assignment is somewhat similar to a Chapter 7 bankruptcy whereby an individual, corporation, company, or partnership (the "Assignor") can liquidate its assets in an orderly fashion to equally pay its creditors' claims. However, unlike a Chapter 7 bankruptcy, the Assignor can select the independent third party (the "Assignee") to whom the Assignor voluntarily assigns by transfer or conveyance all of the assets in trust.

Assignments generally proceed much more quickly and efficiently that bankruptcies, and may produce better results and a higher dividend for creditors.  Assignments can be pursuant to statute, or common law, but Assignments are not recognized/utilized in all states.  Assignments may be commenced by individual Assignors, however, individual Assignments are not usually the best option for individuals because, unlike a bankruptcy proceeding, the Assignor does not receive a discharge.

New Jersey Assignment for the Benefit of Creditors

In New Jersey assignments are governed by its Assignment for Benefit of Creditors Statute, N.J.S.A. 2A:19–1 to –50 (the "Statute").   An Assignment is voluntarily commenced by the Assignor by executing a formal "Deed of Assignment" in favor of the Assignee.  This Deed of Assignment is similar to a real estate deed, and must generally be recorded by the Assignee in the county clerk's office in the county where the Assignor's principal office is located. N.J.S.A. 2A:19-45.  The Deed of Assignment effectively transfers all the assets of the Assignor to the Assignee.  

Administration of the Estate

As explained by the Appellate Division of the New Jersey Superior Court, the Assignee "stands in the shoes" of the Assignor, and has broad powers under the Statute:

The [S]tatute's purpose is to treat all creditors equally and avoid any disproportionate payments to a favored creditor. N.J.S.A. 2A:19–2. ... The assignee's powers are set forth in N.J.S.A. 2A:19–13 and N.J.S.A. 2A:19–14. The assignee has a "dual capacity." First, he or she " 'stands in the shoes' of the assignor with general powers to act in his stead as his 'successor.' " ... Under N.J.S.A. 2A:19–13: "Every assignee shall have as full power and authority to dispose of all of the assignor's property, except as otherwise may be provided, as the assignor had at the time of the general assignment. He may sue for and recover in his own name everything belonging or appertaining to the estate. He may compromise, settle and compound all claims, disputes and litigations of the assignor, refer the same to arbitration, agree with any person concerning the same, redeem all mortgages and conditional contracts, and generally act as and do whatsoever the assignor might have lawfully done in the premises." Second, the assignee also "represent[s] the assignor's entire creditor constituency." ... see N.J.S.A. 2A:19–14. Specifically, N.J.S.A. 2A:19–14 states: "The assignee, in addition to the powers which he may exercise as the successor to the assignor, shall also at all times be the representative of the creditors of the assignor, and shall have the same power to set aside conveyances, and to recover or reach assets for the benefit of the creditors as a creditor would have who was the holder of a judgment and levy against the assignor and his property at the date of the assignment. All conveyances, mortgages and transfers of property, real or personal, made by the assignor, which are void or voidable as against the creditors of the assignor, shall in like manner be void or voidable against the assignee."

In re Gen. Assignment for Benefit of Creditors of Export Transport Co., Inc., A-3309-14T1, 2016 WL 2596409, at *1–2 (N.J. Super. App. Div. May 6, 2016) (internal citations omitted).

Execution of the Deed of Assignment vests in the Assignee legal title to all the Assignor's real and personal property, including property located outside of New Jersey. The Assignee will immediately inspect, secure, and safeguard the Assignor's assets for the benefit of the Assignor's creditors. These assets may include the goodwill of an Assignor, which may require the Assignee to temporarily continue operation of the Assignor to maximize the value of that assets through a turnkey sale.  When necessary the assignee will seek court approval for retention of experts, such as accountants, appraisers, and auctioneers, and any other experts the assignee deems necessary for the proper administration of the ABC estate.


The Assignee is authorized under the Statute, after receiving court approval, to liquidate the assets of the Assignor. Generally, the Assignee will inventory and appraise the Assignor's assets.  The Assignee will liquidate those assets, whether in a bulk or turn-key sale, or through a piecemeal auction, in order to generate the maximum liquidation value for those assets. This can be through a private sale or a public auction.  The Assignee is authorized by the Statute to receive, with court approval, commissions of up to twenty percent (20%) on all sums received by the Assignee in administering the ABC. N.J.S.A. 2A:19-43.  

Avoidance Actions

The Assignee generally has both standing, and the obligation, to bring claims for the return of assets either fraudulently or preferentially transferred from the Assignor to third parties.  

Once all assets have been liquidated, all claims examined and approved, the assignee makes a final accounting with the court, on notice to creditors and the procedure is not essentially different from that in a state court receivership or a bankrupcty court, except the forms and  the time periods are different. If the court approves the accounts, formal papers are filed to complete the case and creditors are given their dividends. The Surrogate of the county examines and approves the final accounting of the assignee.The judge assigned to the case awards fees to the assignee from the proceeds of the sale of assets. After payment of dividends to the creditors this concludes the case.