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ABC: Preference Litigation vs. Bankruptcy Preference Litigation


While the process for an assignment for the benefit of creditors (commonly referred to as "ABC") and a business bankruptcy are similar, corporate bankruptcy lawyers are quick to point out that there are some fundamental differences.

One of the areas where bankruptcy and an ABC are different are the rules governing the recovery of preference payments. In an assignment for the benefit of creditors in New Jersey, the preference period is four months prior to when the deed of assignment was executed. However, in a bankruptcy the preference period is 90 days prior to when the bankruptcy petition is filed. In preference litigation within an assignment for the benefit of creditors, the assignee must prove that there was intent to prefer the creditor over other creditors, but in a bankruptcy proof of intent to prefer a creditor is not necessary in preference litigation.

One of the advantages in bankruptcy for creditors is that they have statutory defenses at their disposal. However, in an assignment for the benefit of creditors there are no statutory defenses to preference litigation.

Contact a Corporate Bankruptcy Lawyer

If you are operating an insolvent business or are involved in insolvency litigation, contact a corporate bankruptcy lawyer so you can be guided accordingly as to what your options are and what option is best for you. The insolvency process can be difficult to navigate, so it is important that you have someone representing you who is familiar with the process to make sure everything goes smoothly.


David E. Sklar

Prior to joining Scura, Wigfield, Heyer, Stevens & Cammarota, LLP, David Sklar graduated from Rutgers University-Newark School of Law with a J.D., Cum Laude. Mr. Sklar was the recipient of a Pro Bono Award and was honored by the New Jersey Bar Association for his commitment to the Street Law Program by being awarded the Street Law Prize.

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