An insolvency practitioner is appointed by the court to liquidate assets and pay off debts on behalf of a bankrupt party. Bankruptcy proceedings involve identifying creditors and determining available resources. Trustees work with the bankrupt but have a duty to creditors. In the UK, insolvency practitioners oversee liquidation, while in the US, a liquidator is appointed. Trustees may also be appointed in other circumstances, such as civil disputes or cases of fraud.
An insolvency practitioner is a court-appointed liquidator in bankruptcy proceedings who is responsible for liquidating assets and using any proceeds to pay off outstanding debts on behalf of the bankrupt. Once a court appoints a receiver, the bankrupt party is officially in receivership and has no control over the disposition of assets that may still exist. In some countries, this position is filled by an administrative officer of the court or bankruptcy division, while in other countries the liquidator may be an officer or a third party natural or legal person appointed by the court to the position.
Bankruptcy proceedings require the court to identify a bankrupt party’s creditors, place them in the order of their right to collect their debts, and determine whether there are resources available from the bankrupt’s estate to pay any of them. Businesses typically go bankrupt while in operation, but without the cash flow needed to meet debt obligations. When a business goes bankrupt, substantial assets, such as real estate or equipment, often still exist. A bankruptcy trustee is appointed to liquidate all assets to pay off creditors or to reorganize the business to make it viable.
A trustee serves until the bankruptcy case is closed, performing his or her fiduciary duties to protect creditors against improper allocations made by bankruptcy, waste, or dissipation. Trustees work with the bankrupt but have a duty to creditors. When the bankrupt party is involuntarily declared bankrupt at the request of its creditors, the relationship between the bankruptcy trustee and the bankrupt can be investigative and adversarial.
In the UK, the title of insolvency practitioner (OR) is a specific designation in the insolvency service for the person who is tasked with overseeing the liquidation. This person may be court-appointed from staff employed to perform this function or may be an outside agency specializing in receivership services. In the United States, the court officially appoints a liquidator, but the title OR is not used as such.
Curatorship is not only applicable to bankruptcy cases. In other types of circumstances, the court may appoint a bankruptcy trustee to run a business or assume control of the property until legal matters are resolved. This can happen in civil disputes over business ownership, in cases of fraud or mismanagement of regulated entities such as banks, or when there is a danger that the subject of a lawsuit could be financially squandered by one party in a way that would be irrecoverable if control is not relinquished to a third party until the dispute can be resolved.
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