Understanding the Role of a Receiver During the Divorce Process

In a divorce, it’s not unusual for one spouse to hide assets, ignore court orders or to allow joint property to be lost or squandered. In certain cases, the court may decide that appointing a receiver is needed to resolve or improve a bad situation.
A receivership is not part of every divorce, but they can play an important role when necessary. Most commonly found in a business setting, a court can appoint a receiver under special circumstances, including divorce cases.

How Receiverships Work in Divorce Cases

Although they’re not common in divorce cases, a receivership may be used to take over an asset at risk of being disposed of or depleted, such as a property or family business. The role of a receiver is to act as the court’s arm and manage the asset in question. This can be done to preserve the asset or to dissolve it, according to what the court order says.  In New Mexico divorces, the person filling this role is called a Special Master.

The Selection of a Receiver

A receiver is always appointed by the court, but either spouse in a divorce can ask for one. Generally, this person has to be “indifferent,” meaning they have no connection to either party, the case itself or the asset in question since they will be the ones managing the asset for the court according to the court’s instructions. In New Mexico, a receiver has to be at least 18 years old–or, if it’s a business, it must be in good standing with and authorized to do business in New Mexico–and not disqualified under federal or state law to handle the job.
Since a receiver will be handling an asset with value, they can be asked to file a bond with the court. This bond insures against the receiver’s behavior, and the amount of it will depend on the value of the asset being managed and the damage a misbehaving receiver could conceivably cause.

The Receiver’s Role in a Divorce

The role of a receiver in a divorce case will vary depending on what the court needs them to do. Generally, what they offer is a way to safeguard marital property that’s at risk as property division progresses. For example, a divorcing couple may have a valuable business that now is being mishandled. Here, a receiver could be appointed to handle the business until it can be addressed in the property division. The receiver can prevent the business from going under or having more losses that eat away at its overall worth.
In another instance, a couple may own real estate together, but conflict has made it impossible for them to manage it as a team and it’s now at risk of being foreclosed on because the bills aren’t being paid even though the money is available. A receiver could step in to take over the property and manage or sell it.
A receiver may be appointed to handle assets that one spouse could hide from the other spouse. For example, a rental property owned by a couple could have the true value of its rent hidden by the spouse managing it. Here, a receiver could handle the rent collection and building management, allowing the court to see the true value of the asset and not just what the managing spouse is reporting.
There are other areas in which a receiver could be brought in to handle an issue, such as a court order involving finances that one spouse isn’t complying with. If you believe a receiver will or should be a part of your divorce case as it moves forward, speak to a family law attorney about the situation as soon as you can.