Perhaps you’re a business-owner, or an individual, who is struggling with debt and unmanagable financial obligations, but you don’t want to file for bankruptcy or go out of business. Unlike bankruptcy, receivership is a Washington State legal procedure in which your debts and assets are placed under the control of a receiver with guidance by a Washington State court. During your receivership case, the Receiver is responsible for managing your assets and repayment of debts. The end goal of a receivership is to liquidate or manage assets in order to pay down or re-organize debts and avoid filing for bankruptcy.
There are two types of receiver. A General receiver has authority to control all of the assets of the debtor and has the authority to liquidate the assets, and in the case of a business wind up the affairs of the business. A Custodial Receiver has control of only a limited or specific property of the debtor and does not have the authority to liquidate the property. The court ultimately decides which type of receiver is chosen for your case.
It is important to understand that once a receiver is appointed by the court, the receiver and the court now control the assets of the debtor, rather than the debtor maintaining control, until the receivership case is closed.
If you discover that a person or business that owes you money that is going into receivership there are a few things to consider:
- Any person with a claim or interest in a receivership case can state their claim in the receivership case- there is no minimum dollar amount.
- If you plan to submit a claim in a receivership (or a bankruptcy), you only have a limited time in which to do so, or you will lose the chance to get paid back. You might want to consider consulting an attorney if you receive notice that some person or business that owes you money has filed for a receivership or bankruptcy.
Once all claims have been submitted to the receiver, the receiver’s job is to review all the assets and debts of the debtor. During this time, the receiver will be filing reports with the court periodically, including:
- A balance sheet;
- A statement of income and expenses;
- A statement of cash receipts and disbursements;
- A statement of the accounts receivable of the receiver, including professional fees; and
- The name of each creditor and the amounts owing to them.
Anyone who is owed money by a business or person in receivership can review this report to understand the likelihood that you will be repaid from the assets of the receivership. The Order in which payments from assets of the receivership is:
- Costs of the receivership (paying the receiver, etc);
- Secured creditors, such as mortgages or other loans with collateral;
- Wages, salaries, or commissions owed to the debtor’s employees;
- Claims for child support of alimony;
- Unsecured claims for taxes; and finally
- All other unsecured debts
If you find yourself involved in a receivership or bankruptcy case, or you may be considering whether receivership or bankruptcy is the right choice for you, call Limitless Law PLLC at (360) 685-0145 today for a free 15-minute phone consultation to find out your options.