Detecting Signs and Taking Action When a Loan Default Is Imminent by Susan Rosenthal and Alan Winick


Picture this. You are a lender for a major financial institution when you discover the following:

*Loan payments are late.

*The borrower’s financials are late.

*The borrower is not in compliance with its financial covenants.

*One of the borrowers’ executive officers has left.

*Substantial litigation has been commenced against the borrower.

For the lender, these are clear signs of a deteriorating financial situation of the borrower which requires immediate action.

For the borrower, these should be the warning signs that the lender will shortly be taking action to protect itself if the situation continues to deteriorate.

Different loans give rise to different responses. Unsecured loans give the lender the fewest options and therefore a greater incentive to negotiate a restructuring of the loan. By the same token, unsecured loans give borrowers the greatest negotiating ability to restructure their loan under the threat of bankruptcy. The options under a secured loan depend on the type and value of the collateral.

The threat of bankruptcy always provides the borrower with a weapon which must be considered by the lender before taking any steps to enforce its loan.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:


Sheppard Mullin Richter & Hampton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.