Receivership as an Alternative to Bankruptcy

In Wisconsin, Chapter 128 is a bankruptcy alternative referred to as “receivership.” While many businesses and organizations file for Chapter 11 or even Chapter 13 bankruptcy, receivership can be a nice alternative. Receivership offers the benefit of more limited court appearances and other paperwork than what is involved in bankruptcy. Additionally, a business in receivership can potentially salvage the business through restructuring. Receivership is not, however, a viable alternative to bankruptcy for all businesses in financial distress.

What is Receivership?

Pursuant to Chapter 128, a court-appointed receiver is put in control of all assets, properties, and obligations of an organization. The receiver will comb through the business’s financial records in an attempt to find out the reason for the insolvency. Additionally, the receiver will notify all creditors of the business that it has gone into receivership.

A receiver may also be charged with continued operation of the business if it would be in the best interest of the creditors. If continued operation of the business is best, a receiver may choose to appoint an operating agent who will be tasked with managing the day-to-day dealings of the business. In most cases, the business will continue operations until it is sold off in a process comparable to an auction. The proceeds from the company’s sale are used to satisfy the debts, both secured and unsecured, of the company. The fact that the company has continued to operate throughout the restructuring and sale process makes the transition in ownership that much smoother.

In some cases, the business may be able to be rehabilitated. The receiver may be able to pinpoint the reason that the business has gone into a debt crisis and restructure the company accordingly. If the receiver can find a way to dig the business out of debt and restructure it so that it can become profitable once again, then the business may not need to be sold off. Some liquidation of the assets, however, may still be necessary in order to pay off the business debts. The receiver may also negotiate reductions in debt payment with creditors. Typically, a receiver will have more flexibility than a bankruptcy trustee would have in coming up with ways to pay of the debts of the business.

The receiver may opt for a third option beyond sale or rehabilitation of the company. In some cases, the business may be liquidated. The receiver will be in charge of managing the sale of company assets which can be heavily discounted in order to get the money needed to pay off some financial obligations. It is still possible that not all creditors will be properly compensated.

Wisconsin Bankruptcy Attorneys Protecting Your Best Interests

Bankruptcy can be a necessary path to dealing with times of financial turmoil. It is not always the best way and it can be a difficult time while you are deciding whether it is the right path for you. At Hanson & Payne, LLC, we are here to help you through the decision making process. We will walk you through all of your options. Whether bankruptcy is best for you or an alternative such as receivership, we are here to answer your questions. Contact us today.