Peterson Conners LLP‘s attorneys routinely assist clients with receivership matters. Receivership is often thought of as being similar to bankruptcy, but receivership differs from bankruptcy in several significant ways.
First, bankruptcy proceedings always involve a debtor individual or entity. A petition is filed in federal bankruptcy court, and the debtor’s post-petition financial transactions are either scrutinized by the bankruptcy trustee or carried out by the bankruptcy trustee. The purpose of a bankruptcy proceeding is to protect the interests of creditors to the extent possible when discharging or rescheduling the debts of an insolvent debtor.
The purpose of receivership, on the other hand, is to preserve assets. A receivership proceeding does not necessarily involve an insolvent debtor. A receiver may be appointed to regain title to property that has been fraudulently purchased or to preserve the funds in a bank account that might be in danger of being improperly emptied. A receiver may be appointed to enforce a judgment against a debtor who is solvent but refuses to pay. Where there is an insolvent debtor – for example, an entity whose sole asset is some income-producing real estate that is subject to foreclosure – instead of supervising the debtor’s financial affairs as a bankruptcy trustee would do, the receiver completely takes over management of the property, and the debtor loses all control. Commercial real estate loan agreements typically contain provisions requiring the appointment of a receiver in cases of default. Receiverships generally involve state courts and state law.
Our attorneys advise clients regarding receivership issues. We also act as legal counsel to court-appointed receivers to manage the receivership estate.