Turnover Receiverships in Texas
Introduction to Turnover Receiverships in Texas
In Texas, when someone wins a final judgment against another party, they can utilize a legal tool called a turnover receivership to collect what they are owed. A turnover receivership is a legal process where the court appoints a receiver to manage the transfer of all the debtor’s assets that are not exempt from collection. These assets are then sold off to pay the judgment.
Turnover receiverships are especially handy when a debtor has various types of assets, such as bank accounts, real estate, or equipment. By utilizing a turnover receivership, the various collection tasks are consolidated under the management of a single person—the court-appointed receiver.
It is important to note that a turnover receivership, governed by Chapter 31 of the Texas Civil Practice and Remedies Code, is distinct from other types of receiverships in Texas. For instance, Chapter 64 of the Texas Civil Practice and Remedies Code deals with receiverships that can be granted before a judgment to safeguard the plaintiff's interests or prevent fraud. The requirements for obtaining a receiver under Chapter 64 are stricter compared to the post-judgment turnover receivership.
Requirements for Obtaining a Post-Judgment Receivership
If you are considering pursuing a turnover receivership in Texas, it is essential to understand the requirements involved. Let us break them down:
Filing a Motion: The judgment creditor, the party who won the judgment, must file a motion requesting the appointment of a post-judgment receiver. This motion should include details about the proposed receiver's qualifications and the scope of their authority. The judgment creditor must send the judgment debtor notice pursuant to Rule 21a.
**Practice Note: the judgment creditor’s lawyer will want to choose an experienced receiver. This requires that the lawyer speak with the turnover receiver before the receiver is appointed. First, to ensure the receiver has the credentials to handle the case. Second, to make sure the receiver can take the case. And third, to see if the receiver has any specific requests to be included in the motion and order granting receivership. Experienced receivers often use their own forms or have specific instructions for what should be included.
Notifying the Debtor: The judgment creditor must notify the judgment debtor—the party who owes the debt—about the motion for a turnover receivership.
Choosing the Right Receiver: It is crucial for the judgment creditor's lawyer to select an experienced receiver. As stated in the practice note above, this involves verifying the receiver's qualifications and ensuring they are available to take on the case.
Establishing a Turnover Receivership in Texas
Once the motion for a turnover receivership is filed, the court will hold a hearing to determine if it should be granted. Here is what happens during the hearing:
Proving the Judgment: The judgment creditor must demonstrate to the court that they have an unsatisfied judgment against the debtor.
Establishing Nonexempt Property: The judgment creditor also needs to show that the debtor possesses nonexempt assets that can be used to satisfy the judgment. These assets could include personal property, real estate, or other valuable items.
During the hearing, the judgment creditor needs to provide evidence to the court and make sure it is recorded properly. Even if the asset is small, as long as it is not exempt from being used to pay off the debt, it is enough to qualify for the receivership. If the court approves the turnover receivership, the receiver will be granted broad authority to collect and sell the debtor's nonexempt assets.
Costs and Authority of Turnover Receiverships in Texas
Before pursuing a turnover receivership in Texas, it is essential to understand the financial implications and the authority granted to the receiver. In Chapter 31, judgment creditors do not have to pay a bond to appoint a post-judgment receiver. However, some courts may ask for a small bond, usually around $100 to $200. They do this to ensure the plaintiff formally declares when the receivership ends.
Costs: In Texas, turnover receivers usually charge twenty-five percent of what they collect. This fee is considered a court cost that the debtor must pay. So, if there is enough money to cover the whole judgment plus the fee, the creditor does not lose anything. Additionally, the judgment creditor can also get attorneys’ fees and costs. Tex. Civ. P. & Rem. Code31.002(e).
Receiver's Authority: Once the receiver is appointed, they can gather all the info and paperwork they need from the debtor to collect the debtor’s assets that are not protected. The court order should give the receiver wide authority to take and sell these assets. This includes taking possession of debtor’s nonexempt property and related documents, controlling, managing, leasing, or selling the property, collecting the debtor's earnings, rents, and any money owed to them in any manner related to the property, obtaining financial records, and more.
Thus, a turnover receiver is a legal tool that allows various collection tasks to be consolidated to a single person that has a wide authority over a debtor’s nonexempt property.
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