Bankrupt Companies Need Receiver Bond

Bankrupt Companies Need Receiver BondBankrupt Companies Need Receiver Bond may not be the first thing you think of when you hear a company has filed for bankruptcy, but it is one of the initial concerns companies must take care of during bankruptcy proceedings. Companies attempting to restructure and achieve better financial footing still have a responsibility to their debtors and benefactors. In these situations, the debtors may request that a receiver be appointed and also require them to have a bond to guarantee their faithful performance.

It’s only March, and already 17 companies have filed for bankruptcy in 2012, including the legendary Hostess Brands. At this time last year, 15 companies had filed. According to a recent Reuters article, the threat of company financial ruin is not only real, but also one several companies are living out repeatedly. The article compared data from to discover six companies were bankruptcy repeats in 2011, but already four former bankrupt companies again turned to Chapter 22 in 2012. The amount of companies refilling for bankruptcy is growing due, in part, to heavy debt, operation problems and poor restructuring.

Properly restructuring a business covers several risks and responsibilities. It often involves a new board of directors being elected, a change in CEO, and a reshuffle of general employees through layoffs or furloughs. When payments aren’t handled properly and debt continues to eat away at assets, the financial woes only grow.

A receiver bond covers any mishandling of payments made to the company filing bankruptcy. This type of fiduciary bond appoints an individual (can also be a bank) to oversee the reorganization and liquidation of assets. The surety bond covers the cost of damage should the receiver fail to perform the necessary tasks prudently and properly.

Without having a surety bond, everyone ranging from the employees who work from the company to those drawing stock off the profits are at risk for further financial loss. The requirements for a receiver bond are not the same for every state. A surety bonding expert at Jurisco can discuss what your state mandates for receiver bonds.

To learn how much a receiver bond cost contact Jurisco today. Often the jurisdiction and the value of the business’s receivables determine the bond amount. Factors like returning to bankruptcy court repeatedly may increase the risk level of receiver bonds which also affects the price.

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