When to Use Court Receivers
Most civil court-ordered actions are simple, and can be accomplished at the courthouse. Other
court-ordered actions are more complex, such as selling, operating, or
dissolving a business or property. Other examples are undoing fraudulent
transfers, or foreclosing on a debtor's property. Such complex
procedures may be best accomplished with a receiver who carefully
monitors and controls the actions and procedures outside the courtroom.
A
receiver is an unbiased person or entity who is appointed and confirmed
by the court to become an agent of the court. A receiver has a
fiduciary responsibility, and is accountable to all parties, for the
purpose of controlling and protecting assets.
Usually the
creditor's attorney brings a motion before the court, asking for
appointment of a particular receiver to (e.g.) help enforce a judgment.
The court usually grants this request if previous remedies have been
tried unsuccessfully, or there is an ongoing business or property of the
debtor, or the debtor is a known fraud.
Four common situations where receivers are appointed by courts include:
1)
The dissolving of a corporation, where there is a dispute among the
shareholders. The receiver comes in to manage the corporation and helps
to wind-up its affairs.
2) For property. Foreclosing of income
property, or to manage property and collect rents. A receiver makes sure
property is maintained and protected.
3) For judgment recovery. A
receiver can be appointed to control the assets of the judgment debtor.
As an agent of the court, the receiver has more power than a judgment
creditor.
With the court's authorization, the receiver can act as
a levying officer. Where the court has jurisdiction, the receiver can
take the debtor's assets and hold them. The assets are then subject to
the final determination of the court, and the court may decide to
distribute the assets for the benefit of the creditor.
4) For
bankruptcy. This is rare, and many bankruptcy judges think that a
receiver cannot do any more than a bankruptcy trustee can do. I am not a
lawyer, but in my experience receivers usually have more experience
managing assets than most bankruptcy trustees.
In every case,
appointing receivers is considered a drastic remedy to be used when
other methods did not, or will not work. For example, a receiver would
not be appointed to do a simple bank levy or a simple property sale.
A
receiver can do whatever a judge orders. It usually comes down to what
the creditor's lawyer can persuade the judge to order. Receivers are
used in cases of fraudulent debtors with histories of absconding with
creditors' assets.
Receivers are also used with large judgments
that having multiple debtor assets in various locations. For example, a
sneaky debtor has a car in one county, a house in another county, income
property in another, and a business in yet another county. The same
receiver can be appointed in each county, and seize all assets at once
to thwart the games a sneaky debtor could have played.
In the
case of a federal judgment, the receiver can marshall (control and
distribute) assets anywhere in the US. If you find the debtor's assets,
you can just tell the receiver where they are, and the receiver secures
those assets (through the court).
In the case of an ongoing
business - the receiver can create long-term benefits to the business.
The receiver is mandated by law to use their best effort to preserve the
viability of the business while enforcing the court's order.
The
expense of using a receiver can usually be added as a reasonable
expense of recovering a judgment. When the judgment is very large, and
the debtor's assets are verified to be more than enough to pay off a
judgment, but tough to reach, using a receiver can be a very smart move.
Be
aware that receivers are not cheap. They get paid first, so if your
debtor has few assets, the cost of the receiver may leave you owing
legal fees.
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