The Process

How Does the Plaintiff Obtain a Receiver?

After the court issues a final judgment, and the judgment is not been paid, your lawyer (not Mr. Volberding) would file a motion for appointment of a receiver to collect your company’s judgment. Mr. Volberding would draft the motion and proposed order for your lawyer to file. This is necessary because the motion and order must contain certain required information and language.

If the court grants the motion, the judge signs an order appointing a Receiver and authorizing the Receiver to seize the judgment debtor’s accounts and assets.

It will then become the Receiver’s responsibility to collect the judgment. Texas law affords tools for seizing a judgment debtor’s non-exempt assets by a Receiver:

  • Seizing accounts directly from banks
  • Seizing investment accounts
  • Seizing and selling non-exempt real estate such as rental property or office buildings
  • Intercepting non-exempt payments to the debtor, such as customer payments
  • Seizing company assets and subsidiaries

What If I Have a Judgment from Another State?

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.

What If I Have a Judgment from Another Country?

It depends on the country. If the U.S. recognizes judgments from that country, then it can be domesticated in a federal court in Texas. After that is done, it becomes a fully enforceable Texas judgment.

What If I Do Not Yet Have a Judgment?

If someone owes you or your company money on a contract or account receivable, you need to obtain independent legal advice from an experienced attorney, not Mr. Volberding. An attorney can explain how to sue the person or company to obtain a court judgment. After obtaining a judgment, you may be able to apply for appointment of a Receiver if the judgment is not paid. Mr. Volberding would not represent you. You would need to retain your own attorney independently.

What About Consumer Judgments?

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 would not be able to serve as receiver.

What About Divorce Judgments?

Yes. Divorce judgments are often the easiest to enforce because the type and location of the former spouse’s assets are usually known.

How Is the Receiver Paid?

The court will authorize 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 into the Receiver’s attorney trust account, plus expenses. The order will authorize 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 will deliver 75% of the funds collected to the judgment creditor. The remaining 25% plus expenses will be paid to the Receiver.

If the Receiver does not collect any funds, then the Receiver does not receive any fees. The fee is contingency. In that case, 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, but the fees and expenses would be spelled out in the court’s receivership appointment order.

Under Texas law, receivership fees are considered costs of court, like filing fees and the court reporter.

Is a Representation Agreement and Retainer Required?

No. The Receiver works only for the court, not 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.

What If the Judgment Debtor Has Transferred All of the Accounts and Assets?

Frequently, the judgment debtor will hide assets by transferring money and property to other shell companies or to relatives. 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, found in Tex. Bus. & Com. Code, ch. 24. 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 the 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.

How Long Do I Have to Wait After the Judgment to Request a Receiver?

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.

What If the Judgment Debtor Threatens to Sue the Receiver?

Predictably, the judgment debtor may react when the Receiver begins seizing accounts and assets. The Receiver is protected by derived judicial immunity from lawsuits by the judgment debtor. This means that any lawsuits 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.

Can I Obtain a Receiver Before the Judgment?

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. (Texas Business and Organizations Code, chapter 11.)

What If the Judgment Debtor Files Bankruptcy?

If the judgment debtor files bankruptcy, the Receiver stops immediately, enters an appearance in the bankruptcy case, and monitors the bankruptcy proceedings. The Receiver communicates with the bankruptcy trustee, informs the trustee of assets located or obtained, and turns those assets over to the trustee.

The Receiver files a claim for legal fees with the bankruptcy court. These fees are treated as priority administrative claims against the judgment debtor.

The Receiver also obtains and reviews the asset schedules filed by the debtor. 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.

When Will the Receivership End?

There is no time limit. A receivership continues until: (1) the court says so, (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.