The Intersection of Receiverships and Bankruptcy

The intersection of bankruptcy and federal and state receiverships has become a fairly regular occurrence around the country. Cases from Florida, Georgia, Minnesota, New York and Oregon evidence that such incidents are taking place all across the country. There is a tension reflected in some of the cases between the primacy of the orderly and well-developed bankruptcy structure as compared with the much less structured alternative of receivership proceedings. There is also a disinterestedness issue raised by the retention of the receiver as the management of the Debtor in Possession or as the trustee in the bankruptcy. The tendency of the cases favors proceeding in the Bankruptcy Court, as well as the appointment of the receiver as bankruptcy trustee. One might also argue that there is an underlying conflict present between differing arms of the U.S. Department of Justice (DOJ) when the Office of the United States Trustee disagrees with the approach, or results, of actions taken by U.S. Attorneys and the receivers they have caused to be appointed.