Receivership - Debt Collection Remedy For Secured Creditors

In receivership, an appointed third party acts on behalf of a secured creditor and is tasked with taking possession of the debtor's assets, selling them and using the proceeds to pay the secured debt.

At first glance, receivership and bankruptcy may appear to be nearly identical. Both signal financial trouble for a debtor and involve the sale or liquidation of its assets to repay outstanding amounts owed. Yet, they are different and the occurrence of one does not preclude the other. A debtor may be in receivership without being bankrupt or may be in both formal legal states at the same time.

Private or court-appointed receiver

A receiver may be privately appointed by a secured creditor under the terms of the secured loan, or may be appointed by the court.