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Bankruptcy Fundamentals and Residential Mortgage Default Issues

Types of Insolvency Proceedings

  • Assignments for the Benefit of Creditors.
    • Common law provides that a debtor can make a general assignment of all of its property to a trustee, with authority to liquidate the property and distribute the proceeds equitably to creditors.
    • An assignment is the functional equivalent of liquidation under Chapter 7 in that it provides for the liquidation of the assets of a debtor in an orderly, controlled manner which is usually less expensive and much faster.
    • Assignments cannot be used to financially rehabilitate a business, have no automatic stay, cannot modify the terms of secured debt, and cannot, except for a limited period of time, affect leases.

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