On March 3, 2026, Nebraska became the first state to adopt the Uniform Assignment for Benefit of Creditors Act (the “Act”). An assignment for the benefit of creditors (“ABC”) is a voluntary transfer of a business’s assets to an independent assignee for the purpose of liquidating those assets and maximizing their value for the benefit of creditors. Although ABCs are substantively similar to Chapter 7 bankruptcies, they are not directly supervised by courts and do not have to comply with the federal bankruptcy code or other rules of civil procedure. As such, ABCs can offer a faster and more flexible alternative to bankruptcy.

Due to the nature of an ABC, the Act specifically identifies who it applies to (the assignor) and who can serve as an assignee. For a business or individual to initiate an ABC as an assignor under the Act, it must (1) have a principal place of business in Nebraska; (2) have its internal affairs governed by Nebraska law; (3) reside in Nebraska; or (4) be an affiliated entity that is, at least partially, owned by a Nebraska-based entity.

If the assignor falls within this criteria, it may assign its assets to an assignee for liquidation as long as the assignee (1) is not a creditor, affiliate or insider of the assignor; (2) is not an affiliate or insider of a creditor; (3) does not have claims against the assignment estate (the “Estate”); or (4) does not have a material financial interest in the outcome of the ABC.

Initiation of the ABC

An ABC is initiated when both the assignor and assignee execute the Assignment Agreement (the “Agreement”). To comply with the Act, the Agreement must be signed by both the assignor and assignee and include the following:

• The name and address of the assignor and assignee;
• A provision transferring or providing for the transfer of all the assignor’s assets;
• A sufficient description of the assigned assets to identify them;
• A provision governing the distribution of the Estate;
• A description of the assignee’s fees and the basis for calculation; and
• A representation by the assignor, under the penalty of perjury, that it is assigning all its assets.

Importantly, the Act requires the assignor to transfer all its assets to ensure the Estate possesses all property subject to creditors’ claims. If the assignor fails to assign all its property, it risks losing the protections and benefits of the ABC process.

Assignee’s Duties and Responsibilities

Upon execution of the Agreement, the assignee obtains all rights, title and interests of the assignor in the assigned assets and must comply with fairly rigorous requirements in administering the Estate. Specifically, the assignee becomes a fiduciary who is legally obligated to (1) manage the ABC in good faith; (2) use reasonable care to maximize distributions; and (3) wind up the Estate in the best interests of the Estate and creditors. If the assignee breaches a fiduciary duty, they can be held personally liable for any individualized harm a creditor suffers as a result of the breach or for any general harm suffered by the Estate or any particular class of creditors.

Creditors Must File Proofs of Claim

Once the Estate possesses all the assignor’s assets, the assignee must notify all known creditors of the ABC within 30 days. The assignee must also establish a method to permit creditors to submit proofs of claim and impose a deadline for their submission. The deadline must be at least 90 days after the execution of the Agreement but cannot exceed 210 days following the Agreement’s execution. As part of the notification process, the assignee must inform creditors of the established method to submit claims and the requisite deadline.

Creditors then bear the burden to submit proofs of claim that comply with the Act and the assignee’s instructions. A proof of claim complies with the Act if it includes:

1. The name, address and other contact information necessary to communicate with the creditor;
2. The amount of the claim;
3. The nature of the claim;¹
4. A description of any Estate asset securing the claim; and
5. All documents upon which the claim is based.

If a proof of claim satisfies these requirements, both the claimed amount and basis for the claim are presumptively valid. But if a creditor submits a proof of claim beyond the imposed deadline, the assignee may only allow the claim if there is a reasonable basis for the untimely submission.

Disputing Proofs of Claim

Upon a creditor’s submission of a proof of claim, the assignee may either accept the claim or dispute it. If the assignee disputes a claim, they must send the creditor a notice identifying the reason for the dispute. But the assignee does not have the authority to unilaterally deny a claim. If the assignee and creditor are unable to mutually resolve the dispute, the assignee must initiate a legal proceeding to obtain a judicial determination as to the claim’s validity. Importantly, the assignee must commence this proceeding prior to the Estate’s final distribution. If the proceeding is not initiated before then, the assignee effectively waives their dispute and must allow the claim.

Recovery Based on Priority and Value of Collateral

Once the assignee receives all claims and the deadline to submit new claims expires, creditors receive disbursements based on the priority of their claims as determined by the Uniform Commercial Code and other applicable law. As a result, a creditor’s recovery largely depends on whether its claim is secured or unsecured and oversecured or undersecured.

Secured Claims: The Act allows oversecured creditors to receive contractually authorized interest, fees, costs and other charges, which may include attorney’s fees, to the extent the value of their collateral exceeds the amount of their secured claim. However, if the value of the collateral is less than the amount of the claim, the creditor holds a secured claim up to the value of the collateral and an unsecured claim for the remaining deficiency.

Unsecured Claims: Unsecured claims are paid according to their applicable priority. If there are insufficient funds to fully satisfy claims within a given priority class, each creditor receives a pro rata distribution based on its proportionate share of the total claims in that class.

Late-Filed Claims Not Accepted for Cause: If the estate ultimately contains sufficient funds to satisfy all timely filed claims, any remaining assets may be distributed to late-filed claims that were not initially allowed by the assignee.

Key Differences between an ABC and Bankruptcy

Although ABCs share many similarities with bankruptcy proceedings, there are notable differences. Mainly, ABCs do not impose an automatic stay on active or future litigation concerning the assignor or debtor. As such, creditors are not barred from attempting to collect on an assignor’s obligations during the course of an ABC. Further, assets of the Estate cannot be sold free and clear of existing security interests like in bankruptcy proceedings and the assignor’s debts are not discharged after the Estate’s final distribution. Despite these drawbacks, ABCs make sense for certain distressed companies and creditors should be aware of the process and statutory requirements.

Conclusion

With distressed businesses now having a more viable alternative to bankruptcy, Nebraska creditors may start to see more debtors use ABCs to resolve their debts. As a result, creditors should familiarize themselves with the distinctions between ABCs and bankruptcies, what they need to do to protect their interests, and the assignee’s duties, obligations and potential liabilities in administering the Estate. Doing so may protect creditors from costly missteps when they participate in the ABC process.