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90 Second Lesson: Bankruptcy vs Receivership

Editors’ Note: this is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to info@dailydac.com and we will try to answer it.

90 Second Lesson

QUESTION:

Do secured creditors benefit more from a debtor’s bankruptcy or federal court receivership?

ANSWER:

In some situations, secured creditors would benefit more from a bankruptcy proceeding than a receivership. Secured creditors should note, though, that if a bankruptcy case is filed after the appointment of a receiver, then the filing will trump the receiver’s appointment. As William S. Schwartz and Christopher J. Horvay explain in greater detail here, the appointment of a receiver itself may constitute grounds for creditors to file an involuntary bankruptcy proceeding.

Note: This 90 Second Lesson is based, in substantial part, in material reprinted from Commercial Bankruptcy Litigation 2d and Strategic Alternatives for and Against Distressed Businesses, with permission of Thomson Reuters. For more information about these publications, please visit www.legalsolutions.com.

About The DailyDAC Editors

The editors and editorial board of DailyDAC include preeminent restructuring and insolvency professionals, journalists, and editors. They are devoted to providing reliable and plain English education and deal intelligence about assignments, corporate bankruptcy, receiverships, out-of-court workouts an similar topics.

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