As a result of the COVID-19 pandemic, several industries have been hit hard and are facing uncertainty about if and when they will recover. As business owners discuss liquidity issues, financial assistance, and bankruptcy options, financial institutions are left worried about collection and loan default issues. Buckingham attorneys have created a list of key insights for financial institutions that will help you manage this economic landscape from an experienced legal perspective as to limit the damage of this health crisis on your business.

Here is what you need to know NOW to protect your business:

1. The effects of the stay home orders and the mandated closure of certain businesses has likely triggered covenant defaults for numerous borrowers.
2. Borrowing from the financial assistance programs such as the CARES Act may trigger defaults under various loan documents prohibiting a borrower from incurring new debt.
3. Short term modifications or amendments to loan documents can be an effective tool to help borrowers weather the storm while avoiding collection litigation.
4. Additionally, short term modifications or amendments can be useful tools to correct errors or problems with documentation, so now is a good time to review loan documents.
5. If collection litigation is inevitable, a properly perfected security interest is an important mechanism to maximize your potential recovery.
6. You may have the right to credit bid your interest if your customer needs to sell its assets.
7. A receivership is a helpful tool that you may be able to utilize to maximize your recovery and give you some level of control over the process.

We frequently represent financial institutions in commercial litigation, receiverships, foreclosure actions, bankruptcies, private and public sales under the Uniform Commercial Code, financial workouts/forbearances and other creditors’ rights issues.   In addition to taking commercial litigation matters to judgment, we also pursue the perfection and collection of those judgments. As part of our preventative maintenance strategy, we also meet with clients to review their loan documents, contracts and credit terms.

No matter the case, we focus on developing effective, practical approaches that help you navigate the current economic conditions.