Oftentimes, the use of a court-appointed receiver can be devastating for the owner of a piece of property. A common example is when a lender seeks the appointment of a receiver to oversee the business of rental property and intercepts revenue while it attempts to foreclose on the property. In this scenario, filing Chapter 11 Bankruptcy can be a viable solution for the property owner.
If a property owner chooses to file Chapter 11 Bankruptcy prior to the appointment of a receiver, the filing will trigger an automatic stay in the case, which, among other actions, prevents the appointment from moving forward.
A filing after the appointment of a receiver can still benefit a property owner, however. Section 543 of the United States Bankruptcy Code requires a court-appointed receiver to return to the Chapter 11 Debtor all property in the receiver’s possession and further requires an accounting of all money received and disbursed. This is not automatic, however. A Bankruptcy Court will typically not require the receiver to turn over the property if he/she can show that it is in the creditors’ best interests for the receiver to retain possession.
If you have any questions about getting rid of a court-appointed receiver through bankruptcy, please contact the VC Law Group at (858) 519-7333 or email at info@thevclawgroup.com.