Cannabis Assignment for the Benefit of Creditors in New Jersey
A New Jersey assignment for the benefit of creditors, or ABC, is a court supervised wind down under N.J.S.A. 2A:19-1. It is the closest thing to a bankruptcy liquidation that a cannabis business can actually use.
Liquidate without federal bankruptcy
In an ABC you assign your assets to a trustee who liquidates them and pays creditors under New Jersey court supervision. Because it is a state process, it is available to cannabis businesses that federal bankruptcy turns away.
When an ABC fits
- The business cannot continue and needs to wind down
- You want an orderly, court supervised liquidation
- Creditors are circling and you want a fair process
- Federal Chapter 7 is not available to your cannabis business
- You want to limit personal exposure where possible
How an ABC works in New Jersey
- You assign your assets to a trustee (the assignee)
- The assignee liquidates assets under court supervision
- Creditors file claims and are paid in priority order
- It runs under N.J.S.A. 2A:19-1, not federal bankruptcy
- It gives creditors an orderly alternative to a free for all
Common questions about Cannabis Assignment for the Benefit of Creditors (NJ)
How is an ABC different from bankruptcy?
An ABC is a New Jersey state law process, not a federal bankruptcy. It reaches a similar result, an orderly liquidation that pays creditors, but it is available to cannabis businesses because it does not run through federal court.
Who runs the liquidation?
A trustee called the assignee, often someone you and your counsel help select, liquidates the assets and pays creditors under New Jersey court supervision.
Will an ABC protect me from creditor lawsuits?
An ABC consolidates creditor claims into one orderly process, which generally stops the race to the courthouse. We will explain exactly how it affects your situation.