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Dislocation Expenses in an Assignment for the Benefit of Creditors

The subject of this article is whether incurred dislocation expenses, based on pre-existing leases, are allowable as administrative costs in the context of an assignment for the benefit of creditors. The discussion necessarily begins with a reference to the assignment statute. The assignment for the benefit of creditors’ statute, chapter 727 of the Florida Statutes, recognizes “administrative expenses” which the assignee must pay “[t]o the extent reasonable and necessary.” “Expenses incurred during the administration of the estate” are accorded a first priority right of payment from assets of the assignment estate, after the satisfaction of secured creditors from the liquidation of any collateral.
The article explores the case of In re Great Western Steamship Co., No. 06-000750 CA 02 (Fla. Cir. Ct. May 30, 2008), and explains that the court’s ruling should have positive implications for assignees and claimants in assignment for the benefit of creditor actions and be a warning to those desiring to recover administrative expenses in such circumstances.  The case illustrates that the continued use of property after the petition date does not constitute an assumption, and accordingly, petitions for administrative expenses based on such claims should be denied, unless the use has been previously been approved by the court.