Redirect Your Debtor’s Business Funds To You
What Is Appointment Of Receivers?
If your debtor is a business and not paying, you can essentially take over the company and redirect all profits to yourself.
An appointment of a receiver is called, and this process displaces the business owner or operator and replaces him or her with an individual — the receiver. The receiver takes over all business operations. His/her job is to make the business as profitable as possible. Profits are given to you to satisfy the debt you are owed. So, how can receivers use the business to pay out debts? There are a few approaches, including:
- Liquidating assets: Once the receiver takes control of the business, they can review the assets the business owns, determine their value, and prioritize the liquidation of the most valuable assets. They can then sell these valuable assets to settle the debt owed.
- Developing a repayment agreement: Receivers can use their control of the business to develop a payment plan that accounts for the amount of money the business can pay per month or per year until the debt is settled. The receiver can direct these repayments to the creditor.
- Boosting profitability: If a business is unable to pay because it is low on profits, a receiver can step in to help increase the bottom line. They can do so by investing in sales and marketing efforts, cutting unnecessary spending, and streamlining business operations to create efficiency.
- Reporting business debt repayment progress to the court: If the business has been taken to court over debt repayments, receivers can also provide the court with detailed reports on the status of the business in its repayment efforts and current financial standing. That way, a judge can get an overview of how well repayment efforts are going.
Debtors hate this. Not only are they are being forced to pay the debt they owe, but someone else has taken over their business – against their wishes – and they have to pay that person an hourly fee. This fee is in addition to the original debt they owed.
How An Appointment Of A Receiver Helps You
An appointment of receiver can:
- Ensure that profits earned by the business are paid to you.
- Grant access to all of the business’s books and records makes it more efficient to identify and seize valuable assets.
- Recover property that was fraudulently transferred to keep it out of your hands.
- Sell off, or liquidate, business assets to satisfy the debt
The costs associated with liquidating assets may be less than those associated with a sheriff’s sale. That means more money in your pocket.
Appointment of receivers is often used as a last resort. While you are not legally required to try other collection tactics, courts often hesitate to approve an appointment unless other avenues have been explored.
At Joshua P. Friedman & Associates, Inc., we know what it takes to get court approval of a receiver. Our motions demonstrate the need for a receiver. Not only do we secure court approval, but we are often able to select the receiver.
How An Appointment Of Receivers Compares To Other Collection Strategies
Utilizing a receiver to repay debts can be much more tailored, efficient, and cost-effective than other collection strategies, such as a sheriff’s auction. Courts can put the business up for public purchase during a sheriff’s auction and give the property to the highest bidder. However, when those owed money choose this strategy, it doesn’t guarantee they can get the full amount they are owed. However, using a receiver can increase their chances of getting what they are owed. Plus, it can give them more control over the repayment process.
Answers To Common Questions About Receivers
If you are weighing your options when hiring a receiver, you may need to answer some questions before reaching a final decision. These are some of the questions we hear the most when people are deciding whether to use one:
Under what circumstances is a receiver typically appointed in California debt cases/When is appointing a receiver an appropriate strategy?
Creditors or courts typically appoint receivers in debt cases when it is necessary to preserve property or assets subject to litigation. This often occurs when the property is in danger of being wasted, lost, or misappropriated. Creditors or a court can appoint receivers as part of a foreclosure action to manage commercial properties or when a business gets dissolved.
Appointing a receiver can be an appropriate strategy when impartial management of the property or assets is needed to protect and preserve them until the case’s final resolution. For example, suppose a debtor is mismanaging property collateral for a loan. In that case, someone may appoint a receiver to take control of the property, collect rents, and maintain the property. The receiver acts as an officer of the court, ensuring that they manage the property or assets in line with all parties’ interests.
What are the primary benefits of appointing a receiver for debt collection purposes?
The primary benefits of appointing a receiver for debt collection purposes include:
- Asset protection: A receiver can protect assets from waste or misappropriation by the debtor. This can be crucial in preserving the value of the property or business.
- Impartial management: Receivers are neutral third parties appointed by the court. They ensure that property or business management is impartial and objective. This is particularly beneficial in contentious cases where parties may have conflicting interests.
- Efficiency: Receivers can often manage and operate properties or businesses more efficiently than a distressed debtor. This can lead to better financial outcomes, such as increased revenue from rental properties or more effective business operations.
- Court oversight: As officers of the court, receivers operate under the supervision of the court, providing a level of oversight and accountability that can reassure creditors and other stakeholders.
What are the typical costs of appointing a receiver for debt collection in California?
The costs associated with appointing a receiver can vary widely depending on the complexity and size of the managed assets. Typically, costs include the receiver’s fees, often billed hourly. These fees can range from $100 to $500 per hour or more, depending on the receiver’s experience and the nature of the work involved.
In addition to the receiver’s fees, there may be additional legal fees, administrative expenses, and costs related to the management and maintenance of the property or business. Parties considering the appointment of a receiver should weigh these costs against the potential benefits and the value of the assets they’re preserving.
How does the court decide to appoint a receiver?
The decision to appoint a receiver is at the court’s discretion. It is typically based on the need to protect and preserve assets that are the subject of litigation. The court will consider several factors, including:
- Likelihood of irreparable harm: If a creditor or court does not appoint a receiver, the court will assess whether irreparable harm is likely to the property or assets. This includes the risk of waste, loss, or mismanagement.
- Legal rights of the parties: The court will consider the legal rights of the parties involved, including any contractual agreements or statutory rights that may support the appointment of a receiver.
- Balance of equities: The court will weigh the equities of the case, considering the potential benefits of appointing a receiver against any harm or inconvenience to the parties involved.
- Availability of other remedies: The court will evaluate whether other less intrusive remedies are available and appropriate to achieve the same objectives.
Appointing a receiver is a remedy of last resort. The court will only grant it when necessary to protect the parties’ interests and the integrity of the legal process.
By answering these questions, we can hopefully provide you with some clarity. If you have any more questions specifically related to your situation, contact us today.
Choosing The Right Receiver Is Crucial
Choosing one who knows what they are doing is important if you decide to utilize a receiver as part of your debt collection efforts. So, what are the qualities you should look for in a receiver? They are:
- Experienced in handling complex business finances
- Experienced in managing a business
- Someone who can communicate well with key stakeholders, including suppliers, creditors, other executives, etc.
- Someone with strong budgeting and accounting skills
- Someone who has a thorough understanding of business ethics and a strong moral compass
If you need assistance in evaluating potential receivers for your debt collection efforts, we can help with vetting their qualifications.
Hire An Experienced Debt Collections Lawyer
Located in Los Angeles, we help clients secure the money they are owed. For more information or for a free consultation, call our firm at 310-278-8600 or contact us online.