State Court Receivership 101: Types of Receivership

In Wisconsin, there are three main types of receivership:

• General Receiverships
• Selfish Receiverships
• Receiverships pendente lite (Latin for “during litigation”)

Many other states identify two primary types of receiverships:

• General Receiverships
• Limited Receiverships

In all states there are commonalities that should be undertaken and considered:

• It’s important to take a look at state and federal laws
• It’s important to look at the order appointing the receiver
• The receiver is an officer of the court with fiduciary duties

General receiverships are being updated to be a state law alternative to bankruptcy. Takes control of all assets of the debtor. The receivers’ duty is to all creditors and parties as they are a representative of the court and not of any individual or group.  General receiverships can be voluntary or involuntary. In Wisconsin, a general receiver always sells the assets to maximize the return to creditors. It is worth noting this is not true in all states. However, in Wisconsin the receivership can sell the property back to interested parties bringing the action closer to a restructuring that can be done in bankruptcy or in other states receiverships.

Selfish receiverships are receiverships that are started to collect a judgement before a judgement creditor. The receivers’ duty runs directly to the judgement creditor. Once the receiver liquidates enough assets to pay off the judgement creditor the receivership is over.

Receivers appointed during litigation, commonly appointed in foreclosure actions. Receivers job is to prevent waste, collect rents, make sure everything is turned over to lienholder, manage property while receivership and litigation is going forward. Can be appointed in shareholder dispute actions or divorces. The goal is to maintain everything in the receivership, but the receiver may have additional responsibilities appointed by court.

Every state has different structures and appointments, which makes it important to follow the three commonalities of reviewing the state and federal laws, reviewing the order, and the receiver following their fiduciary duties to the court.

This article and it’s accompanying video are part of the Receivership 101 series, created in partnership with the Commercial Receivership Association.