Tension Between Receivers And Charging Orders Highlighted In Klinek

One of the most powerful tools available to creditors in judgment enforcement proceedings is to have a receiver appointed for the debtor. This is because a receiver performs three roles simultaneously. First, a receiver is essentially an appendage of the court, meaning that the power of court goes where the receiver goes; if somebody does not comply with an order of the receiver, they will have to show the court good cause why they should not be held in contempt. Second, the receiver is the legal agent of the debtor and is said to “step into the debtor’s shoes” for all legal purposes, much as if the receiver had the debtor’s power of attorney. Finally, the receiver acts as sort of a trustee for the debtor’s assets for the benefit of creditors. The combination of these powers makes a receiver an ideal tool to collect and marshal the assets of the debtor for the benefit of creditors.

Where the powers of the receiver get weird is when the debtor owns an interest in a limited liability company (LLC) or partnership.