A more thorough explanation:

Definition: An Assignment for the Benefit of Creditors (ABC) is a voluntary process that a business can choose instead of filing for bankruptcy. In an ABC, the business transfers all of its assets to a trustee who will manage the assets to pay off debts to creditors. If there are any assets left over, they will be transferred back to the business.

ABC can be beneficial for a struggling business because:

• The business can choose the trustee overseeing the process who might know the specifics of the business better than an appointed trustee.
• It avoids judicial oversight, which can make the process faster and less restrictive.
• It often avoids negative publicity that bankruptcy generates.
• It can help a company trying to purchase assets of a struggling company avoid liability to unsecured creditors of the failing company.

For example, if a small business is struggling to pay its debts, it may choose to do an ABC instead of filing for bankruptcy. The business would transfer all of its assets to a trustee who would then sell the assets to pay off the business's debts. If there are any assets left over, they would be returned to the business.

ABC is becoming more popular, but it varies based on the state. In California, ABC is overseen by common law, while many other states use stricter statutory ABC structures, such as Florida. Depending on the state's corporate law and the company's charter, the struggling business may be forced to get shareholder approval to use ABC, which can be difficult in large corporations.