Bryan Cave Bankruptcy & Restructuring Blog

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The Un-Bankruptcy: A Texas Receivership as an Alternative to Bankruptcy (and fourteen ways to appoint a receiver in The Lone Star State)

April 11, 2016

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Creditors seeking to exercise control over a borrower or collateral may utilize a number of remedies. They may seek a foreclosure or UCC sale, assignment for the benefit of creditors, file an involuntary bankruptcy petition under Section 303 of the Bankruptcy Code (if they hold unsecured claims),[1] or, seek the appointment of a receiver.

Bankruptcy and receivership provide a particular advantage because they allow creditors to take control of the debtor or collateral without the risk of taking possession.  (See the prior post by my colleagues Jay Krystinik and Keith Aurzada on ways lenders may minimize risk in wresting control of a property away from a obligor, here.)  Receiverships provide the additional benefit of flexibility and, often, are more easily obtained and less costly than an involuntary bankruptcy.[2]  Both federal[3] and state laws provide for the appointment of receivers.

Receivership laws vary from

Managing Property Managers — A Guide for Lenders

Lenders are frequently confronted with questionable lender-liability claims not only from borrowers (usually in connection with collection or foreclosure procedures) but also from property managers unable to recover from borrowers. Claims property managers assert directly against lenders include those for breach of oral or written contract, fraud, and unjust enrichment (particularly if the lender has foreclosed its interest in the borrower’s property). Lenders can hedge against the risk of claims by property managers through a variety of methods, both pre- and post-borrower default.

 

As part of origination (or any subsequent review of the borrower’s property management agreement), the lender should ensure that the property management agreement clearly defines that the property manager can turn solely to the borrower for satisfaction of the property manager’s fees and expenses. Thorough property management agreements will also cap expenses the property manager is allowed to incur absent approval, which can help avoid successful

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