The University of Texas' 29th Annual Jay L. Westbrook Bankruptcy Conference November 19, 2010
- Dueling Proceedings Between Bankruptcy And Receiverships
The accompanying article, Receiverships, has introduced the principles of receiverships and has discussed the uses and complexities of receiverships as they appear in state courts, federal courts, and abroad. This Article will now explore receiverships within the context of their interaction and potential collision with a proceeding under the Bankruptcy Code as well as how the roles of parties-in-interest — particularly, creditors and equity investors — differ when they participate in a receivership as compared to a bankruptcy proceeding.
- When A Bankruptcy Proceeding And A Receivership Collide
In recent history, the collision of a receivership and a bankruptcy proceeding was a rare event. When a receivership and a bankruptcy proceeding did collide, the result pitted a federal district court or state court against a bankruptcy court. Nevertheless, the collision of a receivership and a bankruptcy proceeding seems not to have occupied much attention. However, in the wake of the recent economic meltdown and the credit crisis that followed, there has been an increase in the use of SEC-initiated receiverships. Separately, after the crash of the commercial real estate market and in light of the 2005 amendments to the Bankruptcy Code that have limited a debtor’s flexibility in single asset entity proceedings, state court receiverships of such entities have become more common. Together, the opportunity for an increase in the collision of receiverships and bankruptcy proceedings appears inevitable and potentially more challenging than in prior history.
Accordingly, in an effort to equip practitioners with the basic skills necessary to maneuver through this collision, this section of the Article will first discuss issues arising when a federal receivership commenced at the request of the SEC or other governmental unit collides with a pending bankruptcy proceeding. It will next discuss issues arising from a state court receivership colliding with a pending bankruptcy proceeding. Finally, it will discuss issues arising from a bankruptcy proceeding colliding with a pending receivership.
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