In the typical civil court case, a plaintiff sues a defendant for money. If the plaintiff wins, the court renders judgment in favor of the plaintiff and against the defendant and orders the defendant to pay the plaintiff money.
If the defendant, now judgment debtor, does not pay the judgment, the plaintiff, now judgment creditor, can ask the court to appoint a Receiver for the judgment debtor. If appointed, the Receiver’s role is to take possession of the judgment debtor’s non-exempt property and accounts, liquidate them, and pay the plaintiff, thereby satisfying the court’s judgment. Receivership is an effective tool for the court to ensure that its judgments are enforced.
All states have procedures for appointment of a Receiver. Texas law allows judges to appoint a Receiver to collect unpaid judgments in Chapters 31 and 64 of the Texas Civil Practice & Remedies Code andChapter 11 of the Texas Business Organizations Code.
Any Texas court which has issued a judgment can later appoint a Receiver to enforce it. This includes state district courts down to justice of the peace courts.
Federal courts may also appoint receivers to enforce their judgments. Federal courts in Texas apply Texas state law for receivers.
If a court issued a final judgment in your favor as a plaintiff and the judgment is not paid, your lawyer (not Mr. Volberding) can file a motion for appointment of a receiver to collect the judgment. If you retain Volberding Law Firm to serve as the Receiver, we draft the motion and proposed order for your lawyer to file. Getting assistance with the motion and proposed order is important, because the documents must contain certain required information and language.
If the court grants the motion, the court will sign an order appointing a Receiver and authorizing the Receiver to seize the judgment debtor’s accounts and assets.
It then becomes the Receiver’s responsibility to collect the judgment. Texas law affords robust tools for seizing a judgment debtor’s non-exempt assets by a Receiver, including:
If you hold a court judgment from another state, but the judgment debtor has assets in Texas, Mr. Volberding can explain how to “domesticate” the judgment in Texas, thereby making it a Texas judgment. From there, the Texas court may appoint a Receiver for the judgment debtor.
It depends on the country. If the U.S. recognizes judgments from that country, then the judgment can be “domesticated” in a federal court in Texas. Once domesticated, then it becomes a fully enforceable Texas judgment.
If someone owes you or your company money on a contract or account receivable, Mr. Volberding can explain how to sue the person or company to obtain a court judgment. Once done, then you may be able to apply for appointment of a Receiver if the judgment is not paid. Mr. Volberding would not represent you. He would refer you to one or more attorneys. You would need to retain your own attorney independently.
Mr. Volberding only accepts receivership appointments for judgments involving commercial transactions. He does not accept receivership appointments for creditors seeking to collect consumer debts from individuals. For instance, if you have a judgment against an individual for medical bills, credit card debt, or consumer finance loans, Mr. Volberding will not be able to assist you.
Yes. Divorce judgments are often the easiest to enforce, because the type and location of the former spouse’s assets are usually known.
The court authorizes the Receiver’s fees to be paid by the judgment debtor from the money collected, not by the plaintiff / judgment creditor. Typically, the Receiver’s fees will be set at 25% of the funds collected, plus expenses. In that case, the court’s order authorizes the Receiver to seek recovery of the entire judgment, plus an additional 25% for the Receiver’s fees and expenses.
If the Receiver recovers less than 100% of the judgment, then the Receiver delivers 75% of the funds collected to the judgment creditor. The remaining 25% plus expenses are paid to the Receiver.
If the Receiver does not collect any funds, then the Receiver does not receive any fees. The Receiver’s fee is on a contingency basis. If no funds are recovered, the judgment creditor does not owe the Receiver any money, even for receivership expenses. From time to time, there may be exceptions to this arrangement. The fees and expenses are spelled out in the court’s receivership appointment order.
Under Texas law, receivership fees are considered costs of court, like filing fees and court reporter expenses.
No. The Receiver works only for the court, not for the parties or their clients. There is no retainer. There is no representation agreement. Neither the plaintiff nor the attorneys are clients of the Receiver.
Frequently, a judgment debtor hides assets by transferring money and property to shell companies or to relatives. If that occurs, the Receiver can sue the other companies and relatives to claw back improperly transferred funds.
Texas has a law called the Texas Uniform Fraudulent Transfer Act. All states have a similar law. This law makes it illegal for a person or company to transfer assets to avoid a creditor or claimant. The law authorizes a Receiver or creditor to recover the money, plus legal fees. The law contains favorable provisions that make it easier to prove fraudulent transfers by the judgment debtor. This law, in fact, transfers the burden of proof to the debtor to prove that a transfer was legitimate.
The court may appoint a Receiver immediately to enforce its judgment. The judgment creditor does not have to exhaust all other debt collection remedies first.
The decision, however, is up to the judge. Some judges may want to require the judgment creditor / plaintiff to use other procedures first, such as garnishment or writs of execution, before appointing a Receiver.
Predictably, a judgment debtor may react negatively when a Receiver begins seizing accounts and assets. Receivers are protected by derived judicial immunity from lawsuits by the judgment debtor. Any lawsuits filed by the judgment debtor against the Receiver will be dismissed, because the Receiver has complete immunity for doing the Receiver’s job, just like the judge.
Yes. Texas law allows the court to appoint a Receiver for the defendant before trial and before the judgment. It does not happen often, but if the court concludes that the defendant is actively transferring assets, hiding records, or mismanaging the company, or the company is failing fast, the court has authority to appoint a Receiver to take over the company, seize all premises, accounts and assets, and take all necessary steps to protect the company, keep it running, and preserve the assets, while the court works through the litigation to trial and judgment. The governing law is found in Chapter 11 of the Texas Business and Organizations Code.
If the judgment debtor files bankruptcy, the Receiver stops efforts under the receivership immediately. The Receiver enters an appearance in the bankruptcy case and monitors the bankruptcy proceedings. The Receiver communicates with the bankruptcy trustee and informs the trustee of assets located or obtained by the Receiver and turns them over to the trustee.
The Receiver files a claim for legal fees with the bankruptcy court. The Receiver’s fees are treated as priority administrative claims against the judgment debtor.
The Receiver also obtains and reviews the asset schedules filed by the debtor in the bankruptcy case. If the debtor fails to complete the bankruptcy procedures, which often happens, the bankruptcy will be dismissed. The Receiver then resumes work, equipped with information from the debtor’s assets and accounts filings in the bankruptcy case.
There is no time limit for a receivership. The receivership continues until: (1) The court terminates the receivership, (2) The judgment and receivership fees are collected and paid in full, (3) The Receiver concludes the debtor has no assets or insufficient assets to satisfy the judgment, or (4) The debtor files and completes bankruptcy.