It would be "grotesque" if the Wedgwood collection of ceramics was allowed to be sold off, peers have heard.
Peers pressed the government to take action to protect valuable artefacts from the Wedgwood museum at question time on 30 November 2010.
The museum's trust is in administration after it was forced to inherit £134m of debt following the collapse of the Waterford Wedgwood pottery company, and it is feared the collection may be seized by creditors.
Baroness Rawlings, replying for the government, told peers that the Charity Commission had given consent to allow court proceedings to determine whether the collection should be available to an administrator.
The trust was put into administration by the Pension Protection Fund (PPF), a body that safeguards payments to members of defined-benefit pension schemes, despite the fact the share of the shortfall due to the museum's own employees was only around £60,000.
Labour's Lord Howarth of Newport asked: "Would it not be grotesque if the Wedgwood archive, so extraordinarily important in our country's industrial heritage, were to be broken up and destroyed so as to raise no more than a small fraction of the deficit in the Waterford-Wedgwood pension scheme?"
His comments were echoed by the Bishop of Winchester, who said: "It is not only one of the finest ceramic collections in the world - begun by the great and far-sighted and humane Josiah Wedgwood himself - but a repository and monument to the craftsmanship and the labour of potteries people over two and a half centuries."
Lady Rawlings said the government had provided "expertise, advice and funding" over the past year for the "outstanding collection".
"This is an extraordinary case," she said. "The Department for Culture, Media and Sport has helped all along but cannot provide further funding for it."
But she said that if the collection was put up for sale the DCMS would "attempt to secure the collection for the nation".
"The Government cannot influence what the court will take into account," she said. "The administrator is currently in control of the museum's operations and it will present the case to the court with evidence from the trustees."
Peers also heard questions on the death penalty, unpaid interns and passive smoking.