Types of Receivership and Bankruptcy
5 minutes
5 Questions
In the CFE Bankruptcy Fraud domain, receiverships and bankruptcies are legal mechanisms for managing financially distressed or misused entities, and fraud examiners must understand each type because fraud schemes often surface during these proceedings. Receivership: A receiver is a neutral party appointed by a court (or sometimes by agreement) to take custody of, manage, or liquidate assets. There are several types. An equity receivership arises when a court, often at the request of a regulator such as the SEC, appoints a receiver to preserve assets of an entity accused of fraud, such as a Ponzi scheme. A general receivership places all of a debtor's property under the receiver's control, while a limited or special receivership covers only specific assets, such as a particular property securing a loan. Receivers may also be appointed in state court actions by creditors, or in post-judgment proceedings to collect on a judgment. Receiverships are not bankruptcies; they are typically remedial and focused on protecting assets from dissipation while disputes are resolved. Bankruptcy: Governed by the U.S. Bankruptcy Code, bankruptcy is initiated voluntarily by the debtor or involuntarily by creditors. The principal chapters are: Chapter 7 (liquidation), where a trustee sells non-exempt assets and distributes proceeds to creditors; Chapter 11 (reorganization), used mainly by businesses to restructure debts while continuing operations, often as a debtor in possession; Chapter 13 (wage earner plan), allowing individuals with regular income to repay debts over three to five years; Chapter 12 for family farmers and fishermen; Chapter 9 for municipalities; and Chapter 15 for cross-border insolvency cases. Fraud relevance: CFEs scrutinize these proceedings for concealment of assets, false statements on schedules, fraudulent transfers before filing, bust-outs, and multiple filing schemes. Trustees, receivers, examiners, and the U.S. Trustee Program rely on fraud examiners to trace assets, review financial records, and support criminal referrals under 18 U.S.C. Sections 152 and 157.
Types of Receivership and Bankruptcy: A Complete CFE Exam Guide (Bankruptcy Fraud)
Why This Topic Matters
Bankruptcy and receivership are the legal arenas where financially distressed businesses and individuals are sorted out, and they are also prime hunting grounds for fraud. Debtors conceal assets, insiders siphon money before filing, and fraudsters use planned bankruptcies (bust-outs) to walk away from debts they never intended to pay. Because court-appointed trustees and receivers frequently hire Certified Fraud Examiners to trace assets, recover preferential or fraudulent transfers, and document misconduct, the ACFE expects you to understand the different legal vehicles involved. On the CFE Exam, this material sits in the Financial Transactions and Fraud Schemes section under Bankruptcy Fraud. Questions typically test whether you can distinguish the bankruptcy chapters, identify the roles of the parties, and separate receivership from bankruptcy.
What Is Bankruptcy?
Bankruptcy is a federal statutory process governed by the U.S. Bankruptcy Code (Title 11 of the U.S. Code) and administered by federal bankruptcy courts. Its two broad purposes are to give an honest debtor a fresh start and to ensure creditors are treated fairly and in an orderly manner. The case begins when a petition is filed. A voluntary petition is filed by the debtor. An involuntary petition is filed by creditors and is only available under Chapter 7 or Chapter 11; generally, if a debtor has 12 or more creditors, at least three creditors holding unsecured claims above the statutory threshold must join the petition, while a single qualifying creditor may file if there are fewer than 12 creditors.
Filing triggers the automatic stay, which immediately halts most collection actions, lawsuits, foreclosures, and repossessions against the debtor. The property of the debtor becomes the bankruptcy estate. Early in the case the debtor must attend the Section 341 meeting of creditors, where the trustee and creditors question the debtor under oath. Investigators may also use a Rule 2004 examination, a broad discovery tool that allows examination of the debtor and third parties about the debtor's acts, conduct, property, and financial condition.
The Chapters of the Bankruptcy Code
Chapters 1, 3, and 5 contain general provisions, case administration rules, and definitions of the estate, creditors, and the trustee's avoidance powers. The operative chapters you must know are:
Chapter 7 - Liquidation. The most common type of filing. A trustee is appointed to collect the debtor's nonexempt assets, liquidate them, and distribute the proceeds to creditors according to statutory priority. Individuals typically receive a discharge of most remaining debts; corporations do not receive a discharge but simply cease to exist after liquidation. Chapter 7 is the chapter most associated with concealment of assets, because the debtor has an incentive to hide property from the trustee.
Chapter 9 - Municipalities. Permits adjustment of debts for cities, counties, school districts, and other political subdivisions. Rarely tested in depth but you should recognize it.
Chapter 11 - Reorganization. Used primarily by businesses (and occasionally wealthy individuals) that wish to continue operating while restructuring their debts under a court-approved plan. Ordinarily no trustee is appointed; the existing management continues to run the company as the debtor in possession (DIP) with most of the powers and duties of a trustee. A Chapter 11 trustee is appointed only for cause, such as fraud, dishonesty, incompetence, or gross mismanagement, or when appointment is in the interests of creditors. Alternatively, the court may appoint an examiner to investigate allegations of fraud or mismanagement without displacing management. A creditors' committee of the largest unsecured creditors is typically formed to monitor the case.
Chapter 12 - Family Farmers and Family Fishermen. A streamlined reorganization for those with regular annual income from farming or fishing operations.
Chapter 13 - Adjustment of Debts of an Individual with Regular Income. Sometimes called a wage earner plan. The individual keeps assets and repays creditors over three to five years from future income under a plan supervised by a standing trustee. Debt limits apply.
Chapter 15 - Cross-Border Insolvency. Provides a mechanism for cooperation between U.S. courts and foreign insolvency proceedings when a debtor has assets or creditors in more than one country.
Key Participants in a Bankruptcy Case
Bankruptcy judge: Presides over the case, rules on motions and adversary proceedings, and confirms plans.
U.S. Trustee: An official of the Department of Justice (not the court) responsible for the administrative oversight of bankruptcy cases. The U.S. Trustee appoints and supervises panel trustees, monitors cases for abuse, reviews fee applications, and refers suspected bankruptcy crimes to the U.S. Attorney. Do not confuse the U.S. Trustee with the case trustee.
Trustee (case or panel trustee): The fiduciary who administers the estate. In Chapter 7 the trustee liquidates assets; in Chapter 13 a standing trustee collects plan payments; in Chapter 11 a trustee exists only when appointed for cause. The trustee has avoidance powers to recover preferential transfers (payments to creditors within 90 days before filing, or within one year for insiders) and fraudulent transfers (transfers made with actual intent to hinder, delay, or defraud creditors, or made for less than reasonably equivalent value while insolvent). Fraud examiners are frequently hired to identify these transfers.
Examiner: Appointed in Chapter 11 to investigate specific matters and report to the court; an examiner investigates but does not operate the business.
Debtor in possession: Management of a Chapter 11 debtor that retains control of the business.
Creditors and the creditors' committee: Secured creditors hold collateral; unsecured creditors share in whatever remains. The committee may retain its own professionals, including fraud examiners.
Adversary proceedings: Lawsuits within the bankruptcy case, such as actions to recover transfers, to deny a discharge, or to determine that a debt is nondischargeable because it arose from fraud.
What Is a Receivership?
A receivership is a court-ordered remedy in which a neutral third party, the receiver, is appointed to take custody and control of property, a business, or a fund for the benefit of the parties with an interest in it. Unlike bankruptcy, receivership is not a single federal statutory system; it arises from the court's equitable powers and from various state and federal statutes. A receiver is an officer of the court, owes duties to the court rather than to the party who requested the appointment, and acts only within the authority granted by the appointment order. Receivership does not create an automatic stay by statute (though the order often contains injunctive language) and does not provide a discharge of debts.
Types of Receivership
Equity receivership. The traditional form, in which a court exercising equitable jurisdiction appoints a receiver to preserve property that is the subject of litigation, often where there is a risk of waste, dissipation, or mismanagement. Historically used to reorganize railroads and corporations before modern bankruptcy law existed, and still used today as an alternative to bankruptcy.
Federal regulatory or enforcement receivership. Federal district courts appoint receivers at the request of agencies such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC), usually to take control of entities used in Ponzi schemes, investment frauds, or deceptive practices. The receiver freezes and marshals assets, traces funds, pursues clawback actions against net winners and insiders, and distributes recoveries to victims. This is the type of receivership most often associated with fraud investigations.
State court receivership. Appointed under state statutes or common law, often at the request of a secured lender over collateral such as real estate or an operating business, in shareholder disputes, partnership dissolutions, or divorce cases. Many states also provide for receivers in insurance company insolvencies, which are excluded from federal bankruptcy.
Special-purpose or limited receiverships. A receiver may be appointed over a single asset (for example, rents from a building), over a judgment debtor's property to aid collection, or as a custodian of specific disputed funds.
Bank and thrift receiverships. When a federally insured bank fails, the Federal Deposit Insurance Corporation (FDIC) is appointed receiver by the chartering authority. Banks are not eligible for bankruptcy; the FDIC resolution process substitutes for it.
Receivership Versus Bankruptcy: The Core Distinctions
Source of law: bankruptcy is federal statutory law under Title 11; receivership derives from equity and from state or federal statutes.
Who initiates: bankruptcy is usually started by the debtor (or by creditors in an involuntary case); receivership is sought by a litigant, lender, or government agency and imposed by the court.
Who controls: bankruptcy uses a trustee or debtor in possession; receivership uses a receiver who answers to the appointing court.
Stay: bankruptcy has an automatic statutory stay; receivership relies on the terms of the court order.
Discharge: bankruptcy can discharge debts; receivership does not.
Priority and distribution: bankruptcy follows a detailed statutory priority scheme; a receivership distribution plan is approved by the court, often on a pro rata basis to victims.
Overlap: a receivership may precede a bankruptcy, and a receiver may even file a bankruptcy petition for the entity. In Ponzi scheme cases, courts often prefer receivership because it avoids some bankruptcy costs and allows flexible equitable distribution.
Common Bankruptcy Fraud Schemes Linked to These Structures
Concealment of assets (the most common bankruptcy crime), false statements and schedules, multiple filings in different jurisdictions, petition mills that exploit unsophisticated debtors, bust-outs or planned bankruptcies in which a business builds credit and then orders inventory it never intends to pay for, fraudulent conveyances to insiders or straw parties before filing, and bribery or embezzlement by trustees or receivers themselves. Federal bankruptcy crimes are found in 18 U.S.C. sections 152 through 157, and each carries penalties of up to five years imprisonment. Fraud examiners assist trustees, receivers, creditors' committees, and the U.S. Trustee by tracing assets, reconstructing records, and testifying.
Exam Tips: Answering Questions on Types of Receivership and Bankruptcy
1. Memorize the chapters by one-line descriptions. Chapter 7 = liquidation; Chapter 9 = municipalities; Chapter 11 = business reorganization; Chapter 12 = family farmers and fishermen; Chapter 13 = individual with regular income repayment plan; Chapter 15 = cross-border cases. Many questions simply describe a scenario and ask which chapter applies.
2. Know who runs the show in each chapter. Chapter 7 always has a trustee; Chapter 11 normally has a debtor in possession and a trustee only for cause; Chapter 13 has a standing trustee. If a question describes management continuing to operate the business, think Chapter 11 and debtor in possession.
3. Separate the U.S. Trustee from the case trustee. The U.S. Trustee is a Justice Department official who oversees the system and appoints panel trustees. The case trustee administers an individual estate. The exam likes to test this confusion.
4. Examiner versus trustee. An examiner investigates and reports; a trustee takes control of the estate. If the question says management stays in place but the court wants an investigation of fraud allegations, the answer is examiner.
5. Involuntary petitions. Only Chapter 7 or Chapter 11, filed by creditors, with the three-creditor rule when the debtor has 12 or more creditors.
6. Receivership is equitable, not statutory bankruptcy. If a question involves the SEC, CFTC, or FTC freezing a Ponzi scheme operator's assets and appointing someone to recover money for victims, the answer is a federal (equity) receivership, not a bankruptcy trustee. Remember that a receiver is an officer of the court and owes duties to the court, not to the party that sought the appointment.
7. Watch the time periods for avoidance actions. Preferences: 90 days for ordinary creditors, one year for insiders. Fraudulent transfers: two years under the Bankruptcy Code, with longer state law look-back periods available to the trustee. Questions about clawbacks in both bankruptcy and receivership hinge on these dates.
8. Identify the key investigative tools. The Section 341 meeting of creditors and the Rule 2004 examination are the two sworn-examination devices the exam expects you to recognize.
9. Read for the party's objective. If the goal is a fresh start or discharge, it is bankruptcy. If the goal is to preserve and manage disputed property or to protect victims while a regulator litigates, it is receivership. Banks go to FDIC receivership, insurers to state receivership, and neither to bankruptcy court.
10. Eliminate distractors systematically. CFE questions often include one answer that is true in general but not for the chapter or structure described. Anchor on the specific facts: individual or business, liquidation or reorganization, debtor-initiated or creditor- or agency-initiated, and who controls the assets. Choosing the answer that matches all of those facts will consistently lead you to the correct response.
Quick Recap
Bankruptcy is a federal statutory process with defined chapters, an automatic stay, a trustee or debtor in possession, and the possibility of discharge. Receivership is a flexible court-ordered equitable remedy in which a neutral receiver takes control of assets, commonly used by regulators in fraud cases and by lenders and litigants in state court. Fraud examiners serve both systems by tracing assets, recovering transfers, and exposing concealment. Master the chapter distinctions, the roles of the parties, and the bankruptcy-versus-receivership contrast, and you will be well prepared for this portion of the CFE Exam.
Bankruptcy and receivership are the legal arenas where financially distressed businesses and individuals are sorted out, and they are also prime hunting grounds for fraud. Debtors conceal assets, insiders siphon money before filing, and fraudsters use planned bankruptcies (bust-outs) to walk away from debts they never intended to pay. Because court-appointed trustees and receivers frequently hire Certified Fraud Examiners to trace assets, recover preferential or fraudulent transfers, and document misconduct, the ACFE expects you to understand the different legal vehicles involved. On the CFE Exam, this material sits in the Financial Transactions and Fraud Schemes section under Bankruptcy Fraud. Questions typically test whether you can distinguish the bankruptcy chapters, identify the roles of the parties, and separate receivership from bankruptcy.
What Is Bankruptcy?
Bankruptcy is a federal statutory process governed by the U.S. Bankruptcy Code (Title 11 of the U.S. Code) and administered by federal bankruptcy courts. Its two broad purposes are to give an honest debtor a fresh start and to ensure creditors are treated fairly and in an orderly manner. The case begins when a petition is filed. A voluntary petition is filed by the debtor. An involuntary petition is filed by creditors and is only available under Chapter 7 or Chapter 11; generally, if a debtor has 12 or more creditors, at least three creditors holding unsecured claims above the statutory threshold must join the petition, while a single qualifying creditor may file if there are fewer than 12 creditors.
Filing triggers the automatic stay, which immediately halts most collection actions, lawsuits, foreclosures, and repossessions against the debtor. The property of the debtor becomes the bankruptcy estate. Early in the case the debtor must attend the Section 341 meeting of creditors, where the trustee and creditors question the debtor under oath. Investigators may also use a Rule 2004 examination, a broad discovery tool that allows examination of the debtor and third parties about the debtor's acts, conduct, property, and financial condition.
The Chapters of the Bankruptcy Code
Chapters 1, 3, and 5 contain general provisions, case administration rules, and definitions of the estate, creditors, and the trustee's avoidance powers. The operative chapters you must know are:
Chapter 7 - Liquidation. The most common type of filing. A trustee is appointed to collect the debtor's nonexempt assets, liquidate them, and distribute the proceeds to creditors according to statutory priority. Individuals typically receive a discharge of most remaining debts; corporations do not receive a discharge but simply cease to exist after liquidation. Chapter 7 is the chapter most associated with concealment of assets, because the debtor has an incentive to hide property from the trustee.
Chapter 9 - Municipalities. Permits adjustment of debts for cities, counties, school districts, and other political subdivisions. Rarely tested in depth but you should recognize it.
Chapter 11 - Reorganization. Used primarily by businesses (and occasionally wealthy individuals) that wish to continue operating while restructuring their debts under a court-approved plan. Ordinarily no trustee is appointed; the existing management continues to run the company as the debtor in possession (DIP) with most of the powers and duties of a trustee. A Chapter 11 trustee is appointed only for cause, such as fraud, dishonesty, incompetence, or gross mismanagement, or when appointment is in the interests of creditors. Alternatively, the court may appoint an examiner to investigate allegations of fraud or mismanagement without displacing management. A creditors' committee of the largest unsecured creditors is typically formed to monitor the case.
Chapter 12 - Family Farmers and Family Fishermen. A streamlined reorganization for those with regular annual income from farming or fishing operations.
Chapter 13 - Adjustment of Debts of an Individual with Regular Income. Sometimes called a wage earner plan. The individual keeps assets and repays creditors over three to five years from future income under a plan supervised by a standing trustee. Debt limits apply.
Chapter 15 - Cross-Border Insolvency. Provides a mechanism for cooperation between U.S. courts and foreign insolvency proceedings when a debtor has assets or creditors in more than one country.
Key Participants in a Bankruptcy Case
Bankruptcy judge: Presides over the case, rules on motions and adversary proceedings, and confirms plans.
U.S. Trustee: An official of the Department of Justice (not the court) responsible for the administrative oversight of bankruptcy cases. The U.S. Trustee appoints and supervises panel trustees, monitors cases for abuse, reviews fee applications, and refers suspected bankruptcy crimes to the U.S. Attorney. Do not confuse the U.S. Trustee with the case trustee.
Trustee (case or panel trustee): The fiduciary who administers the estate. In Chapter 7 the trustee liquidates assets; in Chapter 13 a standing trustee collects plan payments; in Chapter 11 a trustee exists only when appointed for cause. The trustee has avoidance powers to recover preferential transfers (payments to creditors within 90 days before filing, or within one year for insiders) and fraudulent transfers (transfers made with actual intent to hinder, delay, or defraud creditors, or made for less than reasonably equivalent value while insolvent). Fraud examiners are frequently hired to identify these transfers.
Examiner: Appointed in Chapter 11 to investigate specific matters and report to the court; an examiner investigates but does not operate the business.
Debtor in possession: Management of a Chapter 11 debtor that retains control of the business.
Creditors and the creditors' committee: Secured creditors hold collateral; unsecured creditors share in whatever remains. The committee may retain its own professionals, including fraud examiners.
Adversary proceedings: Lawsuits within the bankruptcy case, such as actions to recover transfers, to deny a discharge, or to determine that a debt is nondischargeable because it arose from fraud.
What Is a Receivership?
A receivership is a court-ordered remedy in which a neutral third party, the receiver, is appointed to take custody and control of property, a business, or a fund for the benefit of the parties with an interest in it. Unlike bankruptcy, receivership is not a single federal statutory system; it arises from the court's equitable powers and from various state and federal statutes. A receiver is an officer of the court, owes duties to the court rather than to the party who requested the appointment, and acts only within the authority granted by the appointment order. Receivership does not create an automatic stay by statute (though the order often contains injunctive language) and does not provide a discharge of debts.
Types of Receivership
Equity receivership. The traditional form, in which a court exercising equitable jurisdiction appoints a receiver to preserve property that is the subject of litigation, often where there is a risk of waste, dissipation, or mismanagement. Historically used to reorganize railroads and corporations before modern bankruptcy law existed, and still used today as an alternative to bankruptcy.
Federal regulatory or enforcement receivership. Federal district courts appoint receivers at the request of agencies such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC), usually to take control of entities used in Ponzi schemes, investment frauds, or deceptive practices. The receiver freezes and marshals assets, traces funds, pursues clawback actions against net winners and insiders, and distributes recoveries to victims. This is the type of receivership most often associated with fraud investigations.
State court receivership. Appointed under state statutes or common law, often at the request of a secured lender over collateral such as real estate or an operating business, in shareholder disputes, partnership dissolutions, or divorce cases. Many states also provide for receivers in insurance company insolvencies, which are excluded from federal bankruptcy.
Special-purpose or limited receiverships. A receiver may be appointed over a single asset (for example, rents from a building), over a judgment debtor's property to aid collection, or as a custodian of specific disputed funds.
Bank and thrift receiverships. When a federally insured bank fails, the Federal Deposit Insurance Corporation (FDIC) is appointed receiver by the chartering authority. Banks are not eligible for bankruptcy; the FDIC resolution process substitutes for it.
Receivership Versus Bankruptcy: The Core Distinctions
Source of law: bankruptcy is federal statutory law under Title 11; receivership derives from equity and from state or federal statutes.
Who initiates: bankruptcy is usually started by the debtor (or by creditors in an involuntary case); receivership is sought by a litigant, lender, or government agency and imposed by the court.
Who controls: bankruptcy uses a trustee or debtor in possession; receivership uses a receiver who answers to the appointing court.
Stay: bankruptcy has an automatic statutory stay; receivership relies on the terms of the court order.
Discharge: bankruptcy can discharge debts; receivership does not.
Priority and distribution: bankruptcy follows a detailed statutory priority scheme; a receivership distribution plan is approved by the court, often on a pro rata basis to victims.
Overlap: a receivership may precede a bankruptcy, and a receiver may even file a bankruptcy petition for the entity. In Ponzi scheme cases, courts often prefer receivership because it avoids some bankruptcy costs and allows flexible equitable distribution.
Common Bankruptcy Fraud Schemes Linked to These Structures
Concealment of assets (the most common bankruptcy crime), false statements and schedules, multiple filings in different jurisdictions, petition mills that exploit unsophisticated debtors, bust-outs or planned bankruptcies in which a business builds credit and then orders inventory it never intends to pay for, fraudulent conveyances to insiders or straw parties before filing, and bribery or embezzlement by trustees or receivers themselves. Federal bankruptcy crimes are found in 18 U.S.C. sections 152 through 157, and each carries penalties of up to five years imprisonment. Fraud examiners assist trustees, receivers, creditors' committees, and the U.S. Trustee by tracing assets, reconstructing records, and testifying.
Exam Tips: Answering Questions on Types of Receivership and Bankruptcy
1. Memorize the chapters by one-line descriptions. Chapter 7 = liquidation; Chapter 9 = municipalities; Chapter 11 = business reorganization; Chapter 12 = family farmers and fishermen; Chapter 13 = individual with regular income repayment plan; Chapter 15 = cross-border cases. Many questions simply describe a scenario and ask which chapter applies.
2. Know who runs the show in each chapter. Chapter 7 always has a trustee; Chapter 11 normally has a debtor in possession and a trustee only for cause; Chapter 13 has a standing trustee. If a question describes management continuing to operate the business, think Chapter 11 and debtor in possession.
3. Separate the U.S. Trustee from the case trustee. The U.S. Trustee is a Justice Department official who oversees the system and appoints panel trustees. The case trustee administers an individual estate. The exam likes to test this confusion.
4. Examiner versus trustee. An examiner investigates and reports; a trustee takes control of the estate. If the question says management stays in place but the court wants an investigation of fraud allegations, the answer is examiner.
5. Involuntary petitions. Only Chapter 7 or Chapter 11, filed by creditors, with the three-creditor rule when the debtor has 12 or more creditors.
6. Receivership is equitable, not statutory bankruptcy. If a question involves the SEC, CFTC, or FTC freezing a Ponzi scheme operator's assets and appointing someone to recover money for victims, the answer is a federal (equity) receivership, not a bankruptcy trustee. Remember that a receiver is an officer of the court and owes duties to the court, not to the party that sought the appointment.
7. Watch the time periods for avoidance actions. Preferences: 90 days for ordinary creditors, one year for insiders. Fraudulent transfers: two years under the Bankruptcy Code, with longer state law look-back periods available to the trustee. Questions about clawbacks in both bankruptcy and receivership hinge on these dates.
8. Identify the key investigative tools. The Section 341 meeting of creditors and the Rule 2004 examination are the two sworn-examination devices the exam expects you to recognize.
9. Read for the party's objective. If the goal is a fresh start or discharge, it is bankruptcy. If the goal is to preserve and manage disputed property or to protect victims while a regulator litigates, it is receivership. Banks go to FDIC receivership, insurers to state receivership, and neither to bankruptcy court.
10. Eliminate distractors systematically. CFE questions often include one answer that is true in general but not for the chapter or structure described. Anchor on the specific facts: individual or business, liquidation or reorganization, debtor-initiated or creditor- or agency-initiated, and who controls the assets. Choosing the answer that matches all of those facts will consistently lead you to the correct response.
Quick Recap
Bankruptcy is a federal statutory process with defined chapters, an automatic stay, a trustee or debtor in possession, and the possibility of discharge. Receivership is a flexible court-ordered equitable remedy in which a neutral receiver takes control of assets, commonly used by regulators in fraud cases and by lenders and litigants in state court. Fraud examiners serve both systems by tracing assets, recovering transfers, and exposing concealment. Master the chapter distinctions, the roles of the parties, and the bankruptcy-versus-receivership contrast, and you will be well prepared for this portion of the CFE Exam.
Test mode:
CFE - Types of Receivership and Bankruptcy Example Questions
Test your knowledge of Types of Receivership and Bankruptcy
Question 1
A company defaults on a loan secured by a charge over its factory and receivables. Under the security agreement, the lender appoints a professional who takes control of only those charged assets. That professional collects the receivables and sells the factory, and the proceeds go to that lender. The company is not dissolved, and its other creditors receive no distribution from this process. A fraud examiner reviewing the case should classify the proceeding as which of the following?
Question 2
Which of the following BEST describes the main distinction between a receivership and a liquidation in insolvency practice?
Question 3
A company files for court-supervised reorganization. Its existing officers keep running the business while they prepare a debt restructuring plan for creditors. A creditors' committee asks a fraud examiner why the risk of post-filing asset diversion is higher here than in a liquidation case it handled earlier, where an outside officeholder sold all the assets and distributed the proceeds. Which feature of this proceeding BEST explains the higher risk?
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