State Court Receivership Did Not Prevent Bankruptcy Filing

Finance and restructuring partner Andy Kassner and counsel Joseph Argentina co-authored an article for The Legal Intelligencer discussing the 530 Donelson case in which the U.S. Bankruptcy Court for the Middle District of Tennessee considered whether orders entered by a Tennessee state court appointing and empowering a receiver deprived the limited liability company’s owners of authority to file a bankruptcy case for the company.

In the case, the Bankruptcy Court held that the managing members retained the ability to file a bankruptcy petition for the company because the orders entered by the state court did not expressly give the receiver exclusive authority to do so. The authors discussed the state court’s order appointing a receiver pursuant to Tennessee law, which provided for the appointment of a receiver over the property, and authorized the receiver to take certain actions, including negotiating the LLC’s loan with its lender, collecting rents, establishing bank accounts, and investigating the best uses for the property.

The authors discussed how general language is not enough to deprive a debtor of its right and authority to file a bankruptcy case and concluded that an analysis is needed to advise clients on authority to file.

The full article is available to Law.com subscribers.