Receiverships & assignments for the benefit of creditors

A receivership places property under the control of a receiver acting as an agent of the court. It can provide a framework for preserving assets, managing operations and, where authorized, selling property and distributing proceeds.

Minnesota distinguishes between limited and general receiverships. The property involved, the receiver’s authority and the purpose of the proceeding depend on the applicable law and court orders. Minnesota’s receivership definitions and appointment statute provide the starting point.

For a lender, the practical questions include what needs protection, whether continued operations preserve value, how the proceeding will be funded and what authority the receiver needs.

An assignment for the benefit of creditors, or ABC, begins with a debtor’s written assignment of property to an assignee for administration and liquidation for creditors’ benefit.

Under Minnesota Statutes section 577.12, the assignment is filed in district court and the assigned property and proceedings are subject to court supervision. Section 577.18 generally applies Minnesota’s general receivership framework to the assignee and subsequent proceedings, subject to the assignment chapter’s provisions.

An ABC can offer a state court process for an orderly wind-down. Its suitability depends on the assets, creditor positions, available funding and disputes that must be resolved.

A receivership or ABC can involve decisions that directly affect collateral value and recovery. We help creditors address:

• The grounds for appointment, selection of a receiver and proposed scope of authority.
• Control of collateral, business records, accounts receivable and proceeds.
• Operating budgets, reporting and expenses that affect available value.
• Proposed asset sales, valuation, marketing and sale terms.
• Competing liens, creditor claims and proposed distributions.
• The relationship between the proceeding, guaranty enforcement and other pending litigation.

Early attention to these issues helps a lender assess whether the proposed process protects its interests and where negotiation or a court ruling may be necessary.

A proposed sale requires more than agreement on a purchase price. A lender needs to understand what property is being sold, which interests affect it, how sale expenses will be paid and what proceeds may remain.

In a general receivership, Minnesota Statutes section 576.46 permits certain court-authorized sales free of liens, subject to statutory conditions, exceptions and protections for affected interests. Liens removed from the property generally attach to the sale proceeds with their existing validity and priority.

We evaluate proposed sale procedures, objections, credit-bidding issues and the treatment of proceeds. The analysis also considers whether continued operations or a different sale process could better preserve collateral value.

Matthew’s work for Star Bank in the RP Financial litigation involved an equipment-finance company, its guarantor and seventeen lenders with competing interests. He led negotiations that secured agreement to a voluntary receivership as an alternative to Chapter 11 bankruptcy.

The matter illustrates the coordination a receivership can require when multiple lenders have interests in a distressed business.

Star Bank v. RP Financial, LLC, et al., Hennepin County District Court, Case No. 27-CV-25-16576.

View the RP Financial case docket

Receiverships and ABCs often intersect with commercial loan workouts, foreclosure and collateral enforcement and bankruptcy litigation.

We evaluate these options together, including the available assets, expected expenses, competing claims and effect on the lender’s remaining remedies. Where suspected transfers or diversion of collateral complicate the matter, our fraud litigation and asset recovery practice addresses the related recovery issues.

If a borrower’s condition is deteriorating or a receivership or assignment has been proposed, contact Matthew Bialick to discuss the lender’s position. Relevant materials may include loan and security documents, lien information, recent financial reporting and any proposed appointment or sale papers.

First contact the firm to arrange a conflict check and an appropriate method for sharing documents.

Contact Matthew
952-239-3095
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