Bankruptcy is a legal process in which an individual or company requests debt relief through a federal court. If the court permits the bankruptcy to proceed, it will typically either involve liquidation through Chapter 7 bankruptcy or reorganization of debts in Chapter 11 bankruptcy.
Receivership and bankruptcy are different in purpose and scope. In terms of the purpose, receivership protects assets and preserves value during a dispute while bankruptcy discharges debts to give a person or company a fresh start.
The scope of receivership is usually limited to the state level and the receiver’s powers come from a state court. By contrast, bankruptcy is filed in a district court and is a federal court process.
Bankruptcy may be the wrong choice simply because it reorganizes or discharges debts, rather than using a receiver to protect valuable property or assets. Ask an experienced lawyer who handles receivership to weigh in on the best route to resolving your situation.