Money judgments involving small to moderate monetary awards are often settled between the two parties without any outside interference. But every now and again, a monetary award is sizable enough to warrant something known as receivership. Sending a judgment debtor’s assets to receivership is a big deal. It is something worth avoiding.
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A Word About Money Judgments
All sorts of civil cases involve finances to some degree. For instance, hiring an attorney costs money. But a money judgment case is a specific kind of case. It is a case in which a monetary award is sought as a means of rectifying the dispute between parties.
Courts tend to award amounts based on several factors: the nature of the case, the type of relief being sought, and whether punitive action against the defendant is warranted. Most money judgment cases end with awards that are comparatively minor. But every once in a while, an award is worth millions. That is where receivership comes into play.
The Basics of Receivership
According to Judgment Collectors, a Utah collection agency that handles only money judgments, explains that receivership is a scenario in which a court-appointed receiver takes control of certain assets owned by the debtor. The receiver’s job is to manage and liquidate said assets so that the creditor can get paid.
Receiverships are utilized under a couple of conditions. The first is a sizable award that will only be paid by seizing and selling multiple assets. The second is a situation in which the debtor, regardless of award size, has assets in multiple locations. Receivership eliminates the need for a judgment creditor or its collection agency to pursue assets in a variety of jurisdictions.
Its Impact on Collection
Receivership can have a profound impact on collection efforts. Let us start with the concept of reach. The main advantage of receivership in this regard is that it is not limited by boundaries.
Under normal circumstances, collection efforts are limited to the county in which the original lawsuit was filed. If a creditor wants to pursue assets in another county or state, the money judgment must be domesticated in that new jurisdiction. But with receivership, such restrictions do not apply. Statewide receivership covers assets throughout the state, regardless of county. Federal receivership goes further to eliminate state boundaries.
Here are a number of additional ways receivership impacts judgment collection:
1. Centralized Management
Receivership creates a scenario in which all collection efforts and court actions are centralized for management purposes. All claims are made in the same court. All asset liquidations are handled by the same court-appointed individual. Centralization eliminates the conflicts that often arise when multiple jurisdictions are involved.
2. Fast Liquidation
Receivership is bad for judgment debtors because receivers can move fairly quickly. Receivers have brought authority to seize, operate, and liquid date debtor assets with little to no interference. A receiver can liquidate all a debtor’s nonexempt assets faster than a local sheriff.
3. Court Supervision
Courts don’t normally get involved in enforcement efforts. They might approve writs of execution and motions to compel, but that’s about at. Creditors are left on their own for everything else. Things are different in receivership.
Court-appointed receivers answer to the courts. Everything is handled transparently, ensuring that courts maintain supervision over the process. Ultimately, receivership ends up being more effective as a result.
Money judgments don’t end up in receivership by default. Receivership is a unique situation that only applies under certain circumstances. But if it is utilized, it is one of the most effective ways of guaranteeing that a judgment creditor gets paid in full.