The New Uniform Assignment For Benefit Of Creditors Act Needs To Be Enacted By State Legislatures

By: Donald L. Swanson

On July 23, 2025, the Uniform Law Commission approved and adopted the Uniform Assignment for Benefit of Creditors Act (the “Uniform Act”) for submission to state legislatures.

What follows are brief thoughts on why the Uniform Act needs to be enacted by legislatures throughout these United States as soon as possible.

A Centuries-Old and Effective Tool

Assignment for benefit of creditors (“ABC”) has a centuries-long history under the common law as an effective tool for liquidating the assets of a failing business with efficiency and credibility.  That history is under the law of trusts:

• debtor is trustor;
• assignee is trustee;
• debtor’s creditors are beneficiaries; and
• courts become involved only when a party sues to address a particular issue.

Common Law of ABCs

The Uniform Act codifies the common law of ABCs and updates that common law to conform to and address the economic realities and issues of today’s economy.

Liquidating assets through such an ABC is better than the alternatives:

• is more-efficient than liquidating under bankruptcy laws and receivership laws, because it eliminates the judicial supervision element (with its associated costs, both economic and non-economic) that is the central feature of both bankruptcy and receivership;
• is more credible than a debtor’s voluntary liquidation, because creditors are often skeptical of whatever the debtor might do, while an ABC assignee is both independent and subject to fiduciary duties to all creditors;
• is more likely to maximize the value of debtor’s assets for the benefit of all creditors, in contrast to a secured creditor’s foreclosure efforts that focus predominantly on advancing the foreclosing creditor’s interests; and
• is often initiated as a cooperative venture between debtor and primarily creditor(s) with an agreed budget and common goals, in contrast to adversarial actions taken by creditors (e.g., receiverships and foreclosures) or by a debtor (e.g., voluntary bankruptcy).

Disuse in Many States

In more recent times, ABCs have fallen into disuse in many states.  That’s because:

• some states have no ABC statutes and have not recognized or adopted the common law of ABCs;
• some states have ABC statutes with bells and whistles (e.g., court supervision and bond requirements) that make the costs of an ABC unacceptable for many debtors and their creditors;
• some states have merged their ABC statutes into their receivership statutes, which retains the ABC process in name only, makes an ABC indistinguishable from a receivership, and eliminates ABC as a separate, distinct and more-efficient tool; and
• the lack of uniformity among state ABC laws makes for a patchwork of confusion and uncertainty for those who want to utilize an ABC, especially as to debtors with assets in more than one state.  

Conclusion

The Uniform Assignment for Benefit of Creditors Act needs to be enacted by state legislatures as soon as possible, throughout these United States.

Further information about the Act may be obtained from the Uniform Law Commission.

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