A receivership is a powerful legal tool that is used to protect assets in a dispute. Minnesota courts may order their use in various contexts, ranging from contested divorces to business and estate administration issues. However, they aren’t appropriate for every situation. In this post, we’ll share more information on the benefits and drawbacks of receiverships in Minnesota.
What is Receivership?
In a receivership, the court appoints a neutral and bonded third party, called a receiver, to have custody of and manage disputed assets. Minnesota recognizes limited receiverships focusing on specific assets and general receiverships encompassing all of a party’s assets. Both types are governed under Chapter 576 of the Minnesota Statutes.
Receivers can be appointed before or after the court makes its judgment. A few situations where they may be helpful include:
- People and businesses facing insolvency – If a creditor makes a claim on a loan in default, a receiver can manage the assets tied to the loan until the parties reach a resolution.
- Mortgage foreclosures – If a mortgage with over $100,000 in starting principal enters foreclosure, the lender can ask the court for a limited receivership to protect the property’s value. A receivership can also give borrowers more time to negotiate a favorable resolution to the foreclosure process.
- Contested divorces – In divorce proceedings, receiverships can protect hotly-contested assets at risk of destruction or depletion. The court may also use them as an enforcement tool if one of the spouses isn’t cooperating or is unlikely to cooperate with the judgment.
- Estate administration issues – Receiverships can help correct course if the court finds a decedent’s personal representative is mishandling assets or violating their fiduciary responsibilities.
Advantages of Receivership
Receiverships are common in some legal areas and rare in others. If the circumstances are right, they can offer these benefits to both the court and the parties:
- Asset preservation – The receiver’s job is to prevent assets from being wasted, lost, destroyed, or unexpectedly sold off.
- Neutrality – Since receivers are completely independent according to Minnesota Statute 576.26, their decisions can break a deadlock between the parties.
- Flexibility – Courts can tailor the receivership’s scope to the nature of a dispute. They can also convert a limited receivership to a general receivership (or vice versa) as circumstances change.
- Creditor protection – Under Minnesota Statute 576.42, there is an automatic stay on certain actions against property in a receivership. For creditors, this means that there is no “race to the courthouse” where the first party to file a claim takes priority.
- Business protection – Receiverships can be an alternative to bankruptcy and help companies restructure or liquidate assets more efficiently.
Disadvantages of Receivership
Receiverships are not ideal for every situation. These are a few drawbacks that your lawyer may warn you about:
- Lack of control – All parties must cooperate with receivers, and they will have no authority to manage their property or make business decisions during the arrangement.
- Cost – Receivership fees are paid from the managed assets and can get expensive quickly.
- Procedural delays – Some decisions that a receiver makes are subject to court approval.
- Others’ responses – While receiverships have advantages as an alternative to business bankruptcy, customers and stakeholders may still respond with fear and doubt.
Contact a Shakopee, MN Receivership Attorney
The Shakopee attorneys of Jaspers, Moriarty & Wetherille, P.A. can answer your questions about how receiverships work. Our team has served Scott County and the southwest Twin Cities for over four decades, and we’ve served as a receiver for numerous high-value estate disputes and contested divorces. Contact our office today for a confidential consultation.