Florida: Assignment for the Benefit of Creditors – Chapter 727

What is Florida Chapter 727?

The intent of this Chapter is to provide a uniform procedure for the administration of insolvent estates, and to ensure full reporting to creditors and equal distribution of assets according to priorities as established under the chapter. It is a non-bankruptcy, State of Florida alternative to filing for a bankruptcy in Federal Court. An assignment for the benefit of creditors, generally speaking, is analogous to a Ch. 7 bankruptcy liquidation of a business entity.

Who can file?

Any Florida registered company that is facing insolvency.

How does Florida Chapter 727 work?

An assignment proceeding is commenced with the execution of an irrevocable assignment in writing, in compliance with the statutory requirements. An irrevocable assignment and schedules are made in writing, containing the name and address of the assignor (the debtor) and assignee and providing for equal distribution of the estate according to the certain priorities established within the same Chapter. Under the terms of the assignment, the assignor conveys to the assignee all of its assets (as defined in Fla. Stat. Sec. 727.103(1)), except such assets as are exempt by law from levy and sale under an execution. Collectively, the assets create an “estate.” The assignee, in turn, is required to take possession of, protect and preserve, and liquidate the assets of the estate and to convert the estate into money.

What assets are exempted to be assigned?

The assets exempted by law from levy and sale under an execution, including, but not limited to, all real property, fixtures, goods, stock, inventory, equipment, furniture, furnishings, accounts receivable, bank deposits, cash, promissory notes, cash value and proceeds of insurance policies, claims and demands belonging to the assignor, wherever such assets may be located.

Who will administer the estate?

The assignee shall take possession and administer the estate in accordance with the provisions established in the Chapter, and shall liquidate the assets of the estate with reasonable dispatch and convert the estate into money, collect all claims and demands hereby assigned as may be collectible, and pay and discharge all reasonable expenses, costs and disbursements in connection with the execution and administration of this assignment from the proceeds of such liquidations and collections. In the event that all debts and liabilities are paid in full, any funds of the estate remaining shall be returned to the assignor.

What is the duty of the Assignor in Chapter 727 proceedings?

Assist the assignee in the administration of the estate and comply with all orders of the court.

What is the duty of the Assignee?

Collect and reduce to money the assets of the estate, whether by suit in any court of competent jurisdiction or by public or private sale.

What are the benefits of filing for the insolvency under Chapter 727?

In general, the assignment for the benefit of creditors is an efficient, relatively economical, and faster means for the administration of insolvent estates within the State of Florida, and remains a viable alternative to liquidation under the Bankruptcy Code. Other benefits of the assignment include:

• Select The Assignee. Unlike a Chapter 7 bankruptcy trustee, who is randomly appointed from those on an approved panel, a corporation making an assignment is generally able to choose the assignee.
• Shareholder Approval. Most corporations require both board and shareholder approval for an ABC because it involves the transfer to the assignee of substantially all of the corporation’s assets. This makes ABCs impractical for most publicly held corporations.
• Liquidator As Fiduciary. The assignee is a fiduciary to the creditors and is typically a professional liquidator.
• Assignee Fees. The fees charged by assignees often involve an upfront payment and a percentage based on the assets liquidated.