Bankruptcy Alternatives: What Is A Receivership?

When it comes to business and corporate bankruptcy, there is not a simple, straight cut answer for all. In fact, if your business is in financial trouble, bankruptcy may not be the only option you will face. There are several alternatives available to creditors and debtors when a company is facing insolvency but bankruptcy is not necessarily the best option. Read on to learn more about how as your Southfield corporate bankruptcy attorney, we can help you find other bankruptcy alternatives. Keep in mind, each situation is unique and seeking legal counsel is the first step in finding the right solution for your particular problem.

One of the lesser-used bankruptcy alternatives, but effective nonetheless, are receiverships. Receiverships are generally regulated at the state level so it is important that you contact an experienced law firm like Maxwell Dunn to discuss how a receivership could work for your specific situation.


Receiverships have their roots in old English Chancery courts where injunctions to preserve property were being filed during the reign of Elizabeth I in the 16th century.


In a receivership, an officer of the court, or a “receiver,” is given custodial responsibility over the property of others; in this case, a business entity. Under the court’s supervision, the receiver is charged with distributing the assets of a business to its creditors. As opposed to bankruptcy, the receiver will immediately replace the management of the company and be charged with operating the business in the interim rather than entrenching the current management in positions of power or shutting down business operations. This can be particularly useful for creditors in cases when a company’s lack of assets is simply symptomatic of poor leadership and has the potential to make the money to pay back all of its debts.


There is also more flexibility in receiverships than in bankruptcy. The receiver can be whomever is the best person for the position and can range from a government regulator, to a private appointee, or an appointee of the court. Whereas bankruptcy law is shackled by strict federal regulations, a receivership judge has much more freedom in laying out appropriate procedures for a receivership.


Furthermore, the costs of a receivership can be much lower than in a bankruptcy. While trustees and receivers must both receive compensation for their work, receivers are not entitled to a commission on the sale of assets like a bankruptcy trustee is. Receiverships also do not require the approval of a plan or confirmation hearings via court proceedings which cuts down on court costs and attorney’s fees that would otherwise be associated with a bankruptcy filing. Finally, receiverships generally move faster than a bankruptcy, which can also lead to lower costs.
If you have questions about receiverships or other bankruptcy alternatives, give Maxwell Dunn a call to talk about what options are available.

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