What is a Receivership Surety Bond?

A Receivership Surety Bond is a type of court fiduciary bond that insures against any financial distress that may be incurred by a party as a result of a court appointment of a receiver. The decision for receivers to post a bond is left to the discretion of the court and state statutes.

With the direction and order of the court, the court-appointed receiver is put in charge of the management, liquidation, and preservation of business and real property assets. Receivership Bonds must be posted in place before court-appointed receivers can proceed with their fiduciary obligations.

Receivership Bonds must be posted in place before court-appointed receivers can proceed with their fiduciary obligations.

 

What is the role of a "Receiver"?

A Receiver is treated as an agent, ministerial officer or temporary caretaker/occupant of a property representing the court appointing him or her and serves as an intermediary for which the court acts. Receivers do not act as agents for the parties in the legal proceedings for which they are appointed. Instead, they serve as remedial auxiliaries to preserve or relieve the overall resolution sought in pending litigation.

There are various receivership duties, including but not limited to:

  • managing real property that is subject to dispute between two parties or pending conclusion of a divorce proceeding
  • collecting rental payments
  • maintaining property during mortgage foreclosures
  • temporarily operating a business while ownership is in dispute

 

How does the Receivership Bond work?

The receiver must execute a Receivership Bond with a surety approved by the court in the amount the court specifies. It is under a condition that the receiver will faithfully perform his or her assigned duties in consonance with the state and federal court laws. The bond creates a path of recourse for parties who feel that the receiver is acting in a manner not favorable to the court.

Most claims against a receiver are contended against the receivership property, and not against the receiver in his or her personal capacity. As a general rule, a receiver may not be sued in his or her individual capacity without the specific authority of the appointing court.

The claims that concern the bond and the Surety are those cited against the receiver in his or her capacity, alleging that the receiver has acted outside the scope of his or her court-appointed duties. That said, the receiver and the receiver's surety will only be held liable where the terms and conditions of the bond are violated, such as misappropriation of funds or embezzlement committed by the receiver.

 

Receivership Bond vs. Bankruptcy Trustee Bond

There is a bit of confusion between a Receivership Bond and a Bankruptcy Trustee Bond.

A Bankruptcy Trustee Bond is required so that trustees will perform their duties according to court rulings. In cases of bankruptcy, the receiver is assigned to hold the business assets until a Trustee is appointed.

While the receiver and the bankruptcy trustee have similar roles in court, the difference is that the receiver operates outside of the federal bankruptcy court and the bankruptcy trustee operates inside the federal bankruptcy court.

Under Rule 66 of the Federal Rules of Civil Procedure, authorities require the appointment of a receiver in litigation before the U.S. District Court. However, Rule 66 does not apply to legal proceedings in the U.S. Bankruptcy Court.

 

How much does a Receivership Bond cost?

The rates for the Receivership Bond may vary according to the qualification of the bond applicant. The bond amount is set by the court and is determined based on the amount or value of assets being managed.

A surety underwriter will review the financial standing and other various factors to approve and issue the bond.

The first step to getting an exact quote for a Receivership Bond is to apply for the bond and get a free quote.

 

How long does the Receivership Bond remain valid?

Receivership bonds are required by the court until the receiver’s fiduciary duties are accomplished. This period differs with each bond.

A Receivership Bond is typically renewable in one year. If the bond is still required at the time of renewal, the bond can be renewed for a new annual term.

 

How do I get a Receivership Surety Bond?

The first step is to find a certified surety bond professional who has the expertise and experience in handling this type of court bond.

Once you contact your surety, they will be able to tell you exactly what requirements you need to submit to qualify for the bond.

Here are the requirements, including but not limited to:

  • Completed application form
  • Financial statements (bank accounts and declarations, income and other sources of funds, irrevocable lines of credit, etc.)
  • Specific bond form obtained from the court
  • Court Appointment of Receiver (get a copy of the court order appointing you as the receiver and also indicating the required surety bond amount)

Once you have submitted your application and documents, the surety underwriter will base the decision if you qualify to get bonded.

Get a fast response and affordable rates with your Receivership Bond. Call us today!

Learn more about Receivership Bonds by watching the video below.

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Receivership Bond Infographic
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