ASSET PROTECTION PLANNING CAN PROVIDE LEVERAGE IN SETTLEMENT AND WORKOUT NEGOTIATIONS

I recently began settlement and workout negotiations with a bank for a client where the debt on a piece of commercial real estate is $4million and the current value is $2million. The client was referred to me by another attorney who was aware of my asset protection planning experience and wanted to learn if there was still time to implement any asset protection planning in order to minimize the client’s exposure to the bank. The client is married, and the specific nature of his situation enabled me to position his assets in a way that makes them unreachable by the bank. After this initial phase of the client’s planning, I was asked to conduct the settlement and workout negotiations. As it turned out, the asset protection planning, as the initial phase in the process, provided my client with very valuable leverage in our negotiations with the bank. Despite the bank pressuring my client to access funds which the bank could not reach, with the objective of my client using those funds to pay a discounted lump sum settlement, we were able to negotiate a much steeper discount because of the structure we had implemented for the client.

My work as an asset protection planning attorney inevitably results in my getting involved in settlement and workout negotiations. The client is confident that I can best explain and defend the asset protection structure and thus force the creditors to accept the least possible amount to resolve the debt. As a result of my many negotiations it is perfectly clear that the facts and circumstances of a debtor’s particular situation are a critical component in determining the ultimate outcome of the workout and settlement agreement. The less available the client’s assets are and the more difficult and expensive it is for the creditor to reach those assets, the greater the leverage and the better the deal we can make. That is why proper asset protection planning is invaluable before any such negotiations occur. In many cases, I am able to develop an asset protection plan for a distressed client that will give my client the necessary leverage in future settlement negotiations to facilitate the overall process. Of course, all of our planning must take into account the fraudulent transfer laws. Many strategies are unavailable when there is a pending or contingent creditor. This is why we urge potential clients to initiate asset protection well in advance of becoming financially distressed.

Having competent and experienced counsel represent you in negotiations is critical. I have dealt with many seasoned businessmen who have for years negotiated their own loans and built successful businesses based on innumerable negotiations. But negotiating with banks when a client is facing the loss of his personal assets is a different story. The client likely has little experience at this and is emotionally involved. This turns out to be a formula for disaster. Moreover, the client has no real idea of what the bank will take and where the settlement should end up …… thus leaving money on the table.

If you are a debtor who is facing future negotiations with the bank, please feel free to contact me to determine if I can be of assistance to you with regard to this process.