A receiver is a court appointee who temporarily takes control of a property or company to stabilize it. Under the court’s authority, the receiver can be empowered to operate a business, investigate violations, negotiate terms, pursue remedies, sell assets, satisfy debts, and more.
The receiver’s role is to act as a neutral party to uphold the law and protect the interests of creditors, shareholders, the public, or other stakeholders. Their mission is to bring a complex situation to a legal and safe resolution.
What is Receivership?
A receivership is the process of the court designating a receiver to take appropriate actions to address an issue or dispute with a company or property. There are 5 common types of receiverships: health and safety, post-judgment, business dispute, family law/divorce, and cannabis-related.
Health and Safety Receiverships
Neglected and abandoned properties can present significant risks to the occupants and surrounding neighborhoods. When the property owner resists resolving the situation, the court may appoint a health and safety receiver.
The receiver handles tasks like placing a lien on the property, keeping track of money spent on rehabilitation, arranging for occupant relocation, and carrying out court orders. They may also address building code violations and safety issues, eventually coming to a positive resolution for the property owner and community.
Post-Judgment Receiverships
Court judgments don’t automatically ensure cooperation. It can take years for creditors to claim what debtors owe, and in some cases, a post-judgment receivership occurs to enforce the judge’s orders. The receiver can locate hidden assets, seize funds, sell property, and distribute funds at the court’s direction.
Business Dispute Receiverships
When business partners are unable to resolve conflicts, a court may appoint a receiver. Business and commercial receiverships most commonly involve selling business assets, negotiating delinquencies, conducting financial analysis, maintaining employee oversight, and handling short-term financing issues.
Alternatively, a receiver may be appointed in a business dispute when a creditor is taking action against a business. The receiver oversees day-to-day business operations while a business undergoes a court-ordered sale or the parties move through the litigation process.
Family Law and Divorce Receiverships
In tense family situations like divorce, people sometimes refuse to face financial and legal realities. A receivership may be established to ensure court orders are enforced, all assets are included, and property is divided appropriately. A family law receivership might also address a family-owned business where ownership and assets are disputed.
California Cannabis Receiverships
In California, the growth of the cannabis industry has created a complex legal situation. Struggling cannabis businesses may be ineligible for federal support programs and bankruptcy protections.
A cannabis receiver may be appointed to ensure the business follows the law while navigating a complicated situation. The receiver might arrange permits, manage licenses, run daily operations, maintain property security, and liquidate assets as needed.
What Does Receivership Mean for Hoarders?
In extreme hoarding situations, court-appointed receivers provide a proactive and potentially life-changing remedy for people who may be struggling with exceptionally difficult challenges. These receiverships often involve individuals with hoarding behaviors, mental health concerns, and an inability to understand health and safety risks.
While the receiver’s scope is limited to addressing the property, the community around a hoarder can come together to provide support. Local representatives and agencies offer resources while the court-appointed receiver handles remediating the property and bringing it into legal compliance.
Why Choose Receivership vs. Bankruptcy?
Bankruptcy is a legal process in which an individual or company requests debt relief through a federal court. If the court permits the bankruptcy to proceed, it will typically either involve liquidation through Chapter 7 bankruptcy or reorganization of debts in Chapter 11 bankruptcy.
Receivership and bankruptcy are different in purpose and scope. In terms of the purpose, receivership protects assets and preserves value during a dispute while bankruptcy discharges debts to give a person or company a fresh start.
The scope of receivership is usually limited to the state level and the receiver’s powers come from a state court. By contrast, bankruptcy is filed in a district court and is a federal court process.
Bankruptcy may be the wrong choice simply because it reorganizes or discharges debts, rather than using a receiver to protect valuable property or assets. Ask an experienced lawyer who handles receivership to weigh in on the best route to resolving your situation.
What Does Receivership Mean For You? Ask Griswold Law
For more information about the positive impact of receiverships, read the Griswold Law case study about Garden Grove. It shows how a dilapidated home in California went into receivership to clean up the property, end trespassing, and preserve community safety.
