Perfil de usuario/a

Mrs Clara Stephens

Resumen biográfico Green Trust Cash Loan In Default - Remedies Available To Your Lender - Reading Between The Linesgreen trust cash installment loans online with no credit check

I am frequently asked by clients as to the steps that a secured creditor will take when a loan is either in default, or is about to be in default. In this article, I try to explain what remedies are available to the lender in this situation, and what are the realities of these remedies.

Early Stage Remedies:

In the early stages, a bank has become aware that the loan is in jeopardy, either because a loan payment is late, or because the borrower has alerted the bank to the difficulties the borrower is experiencing. The bank frequently can/will take some set of actions at this stage, including:

In the early stages of a pending default, the loan officer will call to get an update. They are assessing whether or not additional actions are necessary. In the case of SBA loans, they are also required to do a site visit. It is a necessary step for the bank in order to secure their SBA guarantee. In some situations, a borrower may request a forbearance agreement, which basically is an agreement from the bank NOT to pursue liquidation/foreclosure action as long as the borrower adheres to certain actions. Unfortunately, these actions are frequently beyond the capability of the company, and merely delay the inevitable complete default by the borrower. Default Notices are typically a nasty sounding letter which puts the borrower on notice that they are "In Default". It usually spells out, in draconian language, all sorts of unpleasant actions that the bank will take unless you pay them, in full, within a very short timeframe (like 10 days). A default notice will also frequently spell out that the loan interest rate will shift into high-gear, with default interest rates that are 3%, 5%, or even 8% higher than the rate you had before. The Default Notice may also tell you not to do anything stupid during the period of default. Examples include funneling cash out of the company, or paying back personal green trust cash installment loans online with no credit check, unsecured, subordinate loans, etc.

Middle Stage Remedies:

After attempting to resolve either a pending or early stage default, the bank will begin to use more aggressive tactics. These include both offensive (i.e., trying to get more cash) and defensive (making sure they legally cross the T's and dot the I's). These tactics include:

  • Acceleration of Debt
  • Law Suits
  • Decreased Availability of Lines of Credit
  • Audit of Books and Assets
  • Appraisal of Liquidated Value

Depending on the situation, the lender, when confronted with a default situation, will accelerate the debt, even green trust cash 2600 loan bad credit which are not in default (if held by the same borrower). They will also frequently initiate law suits which seek default judgments against the defaulted company and possibly the borrower personally (if the loan was personally guaranteed). Any lines of credit you may have with that bank will be closed down, and the bank may even send in an auditor to review the books and asset the assets for liquidation value. When this occurs, the bank is serious and is closing in.

Late Stage Remedies:

Once the bank has determined that the company is unable to fulfill it's obligations, it will move rapidly to protect itself and maximize the recovery of it's collateral (the business assets). Actions taken can include:Foreclosure filing on Business Collateral

  • Appointment of Receiver
  • Sweeping of Accounts
  • Repossession of non-business Collateral
  • Entering and Taking Control
  • Involuntary Bankruptcy
  • Selling the Loan/Note

The bank, usually through their lawyer, will file a foreclosure notice on the business and/or real estate. They may also ask that the company enter into a voluntary receivership (basically a voluntary bankruptcy), where the court appoints a receiver to oversee the liquidation of the business. The bank may also sweep accounts for the business, and even the borrower. Non-business collateral, such as real estate pledged by the borrower, can be taken through foreclosure files as well. In some cases, the bank can, after a successful foreclosure on the business, enter the premise and take control of the assets directly (typically using the Sheriff). If the bank joins with other creditors, an involuntary bankruptcy proceeding can be forced onto the company. And in some cases, the bank can simply pass the problem onto another party by selling the note.

Each of these actions has dire consequences for the business (usually fatal) and the borrower (extremely unpleasant).

When it comes to dealing with creditors, who are pursuing remedies under secured loan documents, time is of the essence. Moreover, it is critical to have a strategy and a plan on how to best position yourself and your company to minimize the impact of a default and maximize your opportunity to create value in this difficult situation. While your options are limited, there are opportunities to create value and minimize the damage. But that is the topic for another posting...

Sean Rosser is the Managing Partner of Bridge Management Consulting ( http://www.bridgemgt.com, 401-390-3801), a boutique consulting firm which helps small business owners relieve overwhelming debt and turnaround management.

Mr. Rosser holds a MBA from Harvard University as well as a B.S. Mechanical Engineering degree from the University of California, Berkeley.