Legal Definitions - general assignment

A general assignment is a legal process where a debtor (an individual or business that owes money) voluntarily transfers all of their non-exempt assets to a third party, known as an assignee or trustee. This assignee then liquidates these assets and distributes the proceeds proportionally among all of the debtor's creditors. It serves as an alternative to formal bankruptcy proceedings, often aiming for a more streamlined and less costly resolution for all parties involved.

Here are some examples to illustrate this concept:

• Example 1: Struggling Small Business

  Imagine "BakeMyDay," a small bakery that has accumulated significant debt to its suppliers, equipment lenders, and landlord. The owner realizes the business can no longer operate profitably and cannot pay all its creditors. Instead of filing for bankruptcy, the owner decides to execute a general assignment. They transfer all of BakeMyDay's assets—including ovens, mixers, inventory, and outstanding customer invoices—to an independent trustee. The trustee then sells these assets and distributes the money received fairly among all of BakeMyDay's creditors, ensuring that each creditor receives a proportionate share of what they are owed.

• Example 2: Individual Facing Overwhelming Debt

  Consider Sarah, who has accumulated substantial personal debt from credit cards, medical bills, and a personal loan. She owns some valuable non-exempt assets, such as a second vehicle and a collection of antique furniture, but her income is insufficient to cover all her obligations. To avoid personal bankruptcy, Sarah might opt for a general assignment. She would transfer these specific non-exempt assets to an assignee. The assignee would then sell these items and distribute the funds generated to all of Sarah's creditors, allowing for an organized and equitable repayment process outside of court.

• Example 3: Partnership Dissolution

  Two partners, Mark and Lisa, decide to dissolve their struggling graphic design firm, "Creative Canvas," due to financial difficulties. The firm owes money to several freelance designers, a software vendor, and a bank. Rather than each partner individually dealing with the firm's debts or initiating a complex corporate bankruptcy, they agree to a general assignment. All of Creative Canvas's assets—such as computers, design software licenses, office furniture, and client contracts—are transferred to a designated assignee. This assignee then manages the sale of these assets and distributes the resulting funds to all of Creative Canvas's creditors, ensuring an orderly winding down of the business's financial obligations.