What If the Judgment Debtor Files Bankruptcy?

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.