There are times in the course of a lawsuit when a judge appoints a neutral person to be in charge of the business and property of one of the parties to the lawsuit. A court appointed receiver is usually requested by the lender if there is a strong likelihood that the property might no longer be available at the conclusion of the lawsuit. A court appointed receiver may also be someone who receives rents and profits that might be coming to a debtor before a bankruptcy is sought or in process. Why Appoint a Receiver? When a lender who has sought foreclosure action asks the court to appoint a receiver, the property is out of the control of the borrower. Receivership usually lasts as long as the foreclosure proceedings while the lender and borrower attempt to resolve claims. The presence of the receiver helps protect the lender from the possibility that the borrower could misspend any revenue or mismanage property. Receivership also helps ensure the property isn’t allowed to deteriorate, as the borrower may not be in a position to keep it up. Further, receivership protects a lender from liability that might be incurred if the lender were to take possession of the property. What a Receiver Does A court appoints the receiver to ensure the preservation of the property, so that when the lawsuit is resolved, there is something worth assuming control over. Since the receiver works for the court, the lender will not issue an order to the receiver, but the receiver may look for suggestions from both parties to the lawsuit. Before the receiver can take over, he or she must obtain a bond and file an oath. The receiver should open new bank accounts for the deposit of all receivership funds and possibly get a new taxpayer identification number where appropriate. Insurance should be extended so that the receiver is covered. It’s also a good idea to document the property assets with a camera and take inventories right away. Depending on the type of property, the duties of a court appointed receiver may also include hiring security and a property management company.
