An assignment for benefit of creditor (“ABC”) is, historically, a nonjudicial process for administering the affairs of a failed business. ABC laws are rooted in English common law and predate enactment of federal bankruptcy laws in the U.S.[Fn. 1]

An ABC is made by a formal, voluntary transfer of most-or-all of a business’s assets to an assignee, in trust, to apply the property or its proceeds to the payment of debts and to return any surplus to the debtor.

I’m on a curiosity-quest to find the first-ever U.S. Supreme Court opinion on the subject of bankruptcy.

Excitement arises, for a moment, upon discovering Gibbs v. Gibbs, 1 U.S. 371 (1788). After all, Gibbs v. Gibbs:

The owners of an ambitious Hawaiian golf project in the Makaha Valley of Oahu said Aloha (hello) to new owners, and Aloha (goodbye) to old debt obligations.

Here’s a hard-knocks rule for debtor attorneys:

• Never file Chapter 7 for a corporation or an LLC.

Chapter 7 has always been a grave yard for failed Chapter 11s: that’s where Chapter 11 cases go when debtors can’t get a Chapter 11 plan confirmed. For example, 35.4% of Chapter 11 cases filed between 1989 and 1995 converted to Chapter 7. [Fn. 1]

But Chapter 7 is rarely a good first-choice for corporations and LLCs who want/need to liquidate.

Every now and then we get a glimpse into the past . . . that casts light on issues and events of today.

One such glimpse is a Harvard Law Review article from 1909: “The Effect of a National Bankruptcy Law upon State Laws.”[Fn. 1]. It’s by Samuel Williston—the same Samuel Williston who authored “Williston on Contracts” and who served as professor of law at Harvard Law School from 1895 to 1938. 

Bankruptcy v. State Laws—in 1909

Bankruptcy issues have been around for a very long time—for centuries, in fact.

And bankruptcy issues have been discussed in these United States for the entire time of our existence–and before.

Even in our Colonial times (prior to 1776), bankruptcy and insolvency issues were in much discussion—especially since debtors often found themselves imprisoned, back then, for unpaid debt.

Three InfoWars entities file voluntary bankruptcy on April 17, 2022, under Subchapter V of Chapter 11.[Fn.1] And a storm of controversy immediately erupts on whether the three entities actually qualify for Subchapter V relief.

On June 10, 2022, the Bankruptcy Court enters an “Agreed Order Dismissing Debtors’ Chapter 11 Cases” (Doc. 114), based on this stipulation of the three InfoWars debtors: “Debtors and the UST wish to stipulate to the disposition of the Chapter 11 Cases.”

State laws on assignments for benefit of creditors (“ABC”) have been around for a long time. But times have changed over the last half-century. Specifically, the bankruptcy alternative has changed dramatically:

We have previously written about Siegel v. Fitzgerald, No. 21-441, the Supreme Court case considering the question of whether the 2018 difference in fees between Bankruptcy Administrator judicial districts and U.S. Trustee judicial districts was consistent with the Constitution’s uniformity requirement for bankruptcy laws.

It’s been a hard year for cryptocurrency. The values of most cryptocurrencies, including major coins such as Bitcoin and Ethereum, have continued to tumble. In fact, the price of one stablecoin, which is a form of cryptocurrency tied to another currency, commodity or financial instrument, de-pegged from its cryptocurrency token and entered into a downward spiral. Ultimately, the stablecoin and the crypto token it was pegged to collapsed, erasing $18 billion of value with it.