When to Use a Court Receiver

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.

View all Mark D. Shapiro's articles

About the Author:
Mark D. Shapiro - Judgment Referral Expert - friend to all Judgment Enforcers and contingency collection attorneys: http://www.JudgmentBuy.com - where Judgments go to get Purchased or Enforced!