Receiverships: An Alternative to Bankruptcy You May Not Have Known About

Many businesses that experience serious financial difficulty file for Chapter 11 or, less commonly, Chapter 13 so that they can remain in operation while they deal with their debt situation. Some companies, however, opt for a less common form of debt resolution called receivership.

What is a Receivership?

Receivership is a form of corporate bankruptcy. It enables a distressed business to restructure and avoid liquidation by appointing a trustee, or receiver, to oversee daily operations. Assigning a receiver involves fewer court appearances and less paperwork than a Chapter 11 or 13 bankruptcy, resulting in a more efficient and cost-effective process.

Once appointed, the receiver notifies creditors that the business has gone into receivership, and then reviews financial records to pinpoint the reason for the insolvency. They also assume control over all company properties, assets, and obligations, and generally seek to resolve the debt situation via one of three ways.

Rehabilitation

The receiver will restructure the company and manage it with the intention of returning it to profitability. If necessary, certain assets will be liquidated to pay debts and restore the business to a profitable state. In most cases the receiver will negotiate debt repayment terms with creditors, come up with a plan to pay off all outstanding obligations, and remit monthly status reports to the company, the court, and creditors.

Because receivers are neutral third parties, companies and their creditors are more likely to reach a mutually acceptable agreement more quickly than if the business had filed for bankruptcy. A receiver also has more flexibility than a bankruptcy trustee when it comes to devising strategies for paying off business debts, allowing the company to be saved instead of sold.

Liquidation

If corporate restructuring cannot or does not salvage the business, liquidation may be necessary. In this case, the receiver will oversee the sale of company assets, sometimes at a steep discount, to acquire the money needed to pay certain obligations. After the receivership’s expenses and fees are deducted, all sale proceeds are distributed to creditors on a priority basis. Depending on how much is realized from the liquidation, not all creditors may be paid.

Sale

A receiver may be appointed to oversee operations while the search for a buyer takes place. Their job is to ensure that all company activities and operations meet any industry or government required regulations and standards while keeping the business going until a buyer steps forward.

Receivership is an option for Oklahoma businesses that are treading water financially, but it may not be suitable for all companies. If your business is experiencing difficulties, contact Attorney B. David Sisson for a no-obligation consultation today. Mr. Sisson has helped many companies choose the right debt relief solution for their circumstances, and will use his experience and knowledge to ensure that you make the right decision. Afterwards, he will guide you through any associated proceedings so that you are in the best position to enjoy a better financial future.