Receivers and Assignees
Disposition of the assets of a debtor does not always take place in the context of a bankruptcy case. Although less used, the Maryland state courts also have procedures for the liquidation of assets and payment of creditors through receiverships and assignments for the benefit of creditors.
A receivership is a creditor remedy. Where a debtor is wasting or destroying assets a creditor may petition the Circuit Court for the appointment of a receiver to take control of the debtor’s assets and liquidate them in an orderly manner for the benefit of creditors. Also, loan documents frequently provide that the lender may seek appointment of a receiver if the borrower defaults in payment of the loan.
An assignment for the benefit of creditors is a debtor remedy. Where a business entity needs to liquidate its assets and distribute the proceeds equitably among its creditors, an assignment for the benefit of creditors is usually less expensive than a Chapter 7 bankruptcy case. It may also be advantageous, because the business owner selects the assignee who will take control of the assets. In a Chapter 7 case, the trustee is selected by the court or creditors.
James Olson has represented both receivers and assignees in a variety of industries. He is able to advise on the advantages and disadvantages of these state procedures as an alternative to bankruptcy options.