The Illinois Receivership Act will take effect on January 1, 2026, transforming how courts, creditors, and distressed businesses handle asset protection and management across the state. This new legislation provides expanded legal tools for addressing financially distressed assets, ensuring greater consistency and transparency in receivership proceedings.
Scope of the Act:
•Applies to commercial real estate, business entities, and other commercial assets.
•Does not apply to residential real estate with one to six dwelling units unless the property is used for commercial purposes.
•Excludes receiverships governed by other Illinois laws, such as the Illinois Mortgage Foreclosure Law or any governmental receivership.
The Act gives Illinois litigators and courts broader authority to manage and protect assets in situations involving creditor enforcement, insolvency, or corporate disputes.
When a Receiver Can Be Appointed
Receivers may be appointed before or after judgment in cases involving:
•Enforcement of liens or security interests
•Disputes among shareholders, partners, or members
•Mismanagement or misuse of corporate or business assets
•At-risk or distressed real estate
•Insolvent or failing business operations
The Act also allows Illinois courts to recognize foreign receivership orders and to appoint ancillary receivers for assets located in Illinois, expanding the reach of receivership authority across state lines.
Once a receiver is appointed, a limited automatic stay goes into effect for the receivership property, helping to protect and preserve the assets under court supervision.
Powers Granted to Receivers
The Illinois Receivership Act grants receivers broad powers to take control, preserve, and manage business and real-estate assets. Key powers include:
•Securing and managing property under receivership
•Operating businesses and incurring ordinary-course debts
•Initiating and defending claims on behalf of the estate
•Hiring professionals such as attorneys, accountants, or appraisers
•Selling, leasing, or transferring assets (with court approval if outside the ordinary course of business)
•Assuming or rejecting contracts and leases
•Making distributions to creditors in accordance with Illinois law
Receivers and their professionals are entitled to reasonable compensation, paid from the receivership estate or allocated by court order to the party requesting the appointment.
Protections for Secured Creditors
The Act carefully balances the rights of secured creditors with the receiver’s management authority. It ensures that:
•Existing liens remain valid, including liens on after-acquired property.
•Secured creditors may retain possession and control of collateral to preserve lien priority.
•Creditors may perfect and maintain liens during the receivership.
•Sales of assets free and clear of liens require senior lienholder consent or remain subject to that lien.
•Junior creditors cannot force a sale over a senior lienholder’s objection.
•Secured creditors may credit-bid at asset sales.
•Subordination agreements remain enforceable.
•Proceeds from asset sales are distributed in accordance with Illinois lien-priority law.
Importantly, requesting a receivership does not convert a creditor into a mortgagee in possession or waive existing rights.
Notice, Claims, and Cooperation Requirements
Once appointed, the receiver must promptly notify all known creditors. Each creditor is given at least 60 days to file a proof of claim detailing the nature and amount of the claim.
Property owners are required to cooperate with the receiver, which includes:
•Turning over property and granting access
•Providing financial records, tax returns, and other relevant documents
•Submitting to a sworn examination if requested
Failure to comply may result in a finding of contempt by the court.
Key Takeaways
The Illinois Receivership Act marks a major advancement in Illinois commercial and insolvency practice. It provides courts, creditors, and business owners with a structured and predictable process for preserving value, protecting assets, and managing financially distressed operations.
For creditors, it offers powerful tools to secure and recover collateral without resorting to full bankruptcy proceedings. For businesses and their counsel, it presents a framework that can stabilize operations and protect stakeholder interests during a downturn.
This Act modernizes Illinois receivership practice—bridging the gap between traditional equity receiverships and federal bankruptcy procedures—and gives litigators a vital new mechanism to safeguard assets and creditor rights.