A secured creditor facing default on one of its loans has the option of taking the issue to court and having a receiver appointed. The receiver will then manage the property or the business that’s in default until the loan is brought current or the property or business is sold or dissolved.
A receivership is not the same as when a group of creditors get together and force a bankruptcy on a company. A receivership is often pursued by an individual secured creditor, though in some instances, creditors may join together in the action.
A receivership can also be requested by companies facing insolvency by petitioning the court and seeking the appointment of a receiver to oversee the process of closing down the business, often referred to in legal terms as dissolution. Sometimes, a receivership can also be requested when ownership disputes arise. A receiver in this situation would try to save the business or real estate asset in question.
Receiverships are not widely understood by property and business owners. If you or your business is facing the prospect of going into receivership—or is already in receivership—in or around Pittsburgh, Pennsylvania, contact Luvara Law Group LLC. If your business is facing dissolution or internal disputes and wishes to have a receiver appointed, we can help with that as well.
Our attorneys have more than 75 combined years of legal experience and will work with you to help you exercise your full rights under the law, representing your interests before your business partners and creditors.
Typically, a receivership is a powerful tool that a secured creditor can use to take control over a business to manage its entire operation, all its assets, and all decisions regarding finances. The owners and others running the company remain on board but essentially lose control of operations and turn over decision-making to the appointed receiver.
The receiver must be an independent party with no prior ties to either the lender or the borrower and cannot act to the benefit or detriment of one party or the other.
Companies with financial issues that may lead them into bankruptcy can also request the appointment of a receiver, who will then work to restructure operations. The receiver can streamline operations, cease paying any dividends or interest payments, and sell off assets as necessary, while charting a course back to solvency.
A bankruptcy is different from a receivership. In a bankruptcy, the company seeks legal protection against its creditors by filing under a chapter of the bankruptcy code, either to reorganize the debts or liquidate assets to satisfy creditors. A receivership allows a creditor to take control of the company to help recover payments owed to them or take back secured property.
Creditors in a receivership also get to appoint the trustee, or receiver, whereas in bankruptcy, the court will appoint a trustee to oversee everything. Unlike a bankruptcy, a receivership is not supervised directly by a court, but it represents a time-honored method to resolve debt obligations and is authorized under the U.S. Code.
With a Chapter 11 bankruptcy, a business can continue operating as a debtor-in-possession, but creditors can force the company into liquidation if they are not satisfied with the repayment plan offered to them. Still, businesses facing receivership often will file for bankruptcy, either a Chapter 11 reorganization or a Chapter 7 liquidation. Filing for bankruptcy immediately halts the receivership.
If your company is facing or already involved in receivership, either voluntary or involuntary, our attorneys can work with you on exploring your options to protect your assets and bring your business back to viability. Luvara Legal Group LLC will provide clear guidance to any entity or individuals facing receivership. We proudly serve clients in and around Pittsburgh, as well as Greensburg, Washington, and Uniontown.