Alabama law sets rules for assigning assets to pay creditors

An assignee collects or sells assigned assets and pays allowed creditor claims according to the law’s priority rules. The law covers assignments by organizations with the specified ties to Alabama and by individuals whose principal residence is in Alabama. The assignee may abandon an asset if doing so is more economically efficient. A protected secured creditor generally receives the value of its interest before later distributions, subject to the law’s rules for expenses and priorities. When available funds cannot fully pay claims of equal priority, creditors share those funds in proportion to their claim amounts. The law applies to assignments made on or after October 1, 2026, when it takes effect.

The assignee must notify creditors and provide a way to submit claims. The assignee must notify each known creditor and use reasonable means to share claim information with unknown creditors. A creditor may waive notice in a signed record. The assignee may allow some claims without a timely proof of claim and may accept a late claim when there is a reasonable basis. Notice to known creditors is due within a reasonable time, no later than 30 days after the assignment takes effect. The assignee sets one claim deadline 90 to 210 days after that date.

The assignor must help administer the assignment, and the assignee must manage it for creditors. These duties apply to the assignor and assignee handling an assignment under the law. The assignor must preserve and turn over assets, provide needed information and lists, and help transfer property. The assignee must use reasonable care to maximize distributions, keep records, and pay administrative expenses only when the estate has enough unencumbered assets. The assignee must send creditors a summary of the estate and a progress report at least every six months.