When a California business reaches the end, the owner faces a choice most have never heard framed honestly: a federal bankruptcy liquidation, or California’s older, quieter alternative — the assignment for the benefit of creditors (ABC), a creature of common law recognized throughout the Code of Civil Procedure (see CCP §1802 and the general assignment provisions referenced in §493.010).
What an ABC is: the company transfers substantially all assets to a neutral third-party assignee — a professional fiduciary — who liquidates them and distributes proceeds to creditors according to lawful priorities. No judge presides; no federal trustee is appointed; no public bankruptcy docket opens.
The comparison that matters:
Speed. ABCs conclude in weeks to months; Chapter 7 business cases run a year or more. Asset value — especially going-concern value, customer relationships, perishable inventory — decays with time, and the ABC’s speed is often the difference between a meaningful distribution and administrative ash.
Control of the sale. The company selects the assignee and can line up an asset buyer before assigning, letting the assignee close quickly. In Chapter 7 a randomly assigned trustee, a stranger to the business, controls everything.
Privacy. No federal filing, no §341 creditor meeting, no public examination of the owners. For owners with reputations, other ventures, or future banking relationships, this is worth more than it sounds.
Cost. Assignee fees are typically a fraction of the layered administrative costs of bankruptcy.
What an ABC doesn’t do: there is no automatic stay (though as a practical matter, suing an assetless shell rarely pays), no discharge of the entity’s debts (irrelevant — the corporation dies either way), and crucially, no discharge of the owner’s personal guarantees, which must be negotiated or handled separately. Secured creditors’ liens ride through, so lender cooperation is a precondition.
When ABC wins: a corporation or LLC with real assets to liquidate, a possible buyer, cooperative senior lenders, and owners who value speed and discretion. When Chapter 7 wins: hopeless litigation exposure needing the stay, or hopelessly adversarial creditors needing a federal referee.
Lenders and their counsel have known this menu for decades. Owners usually learn it too late to use it well. Learn it now, while it’s academic.
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