Articles Posted in Settlements and Workouts

Asset protection attorneys who are involved in defending against post judgment discovery and related collection activity have long been aware that debtors are required to submit to creditor examinations and provide information. Nonetheless, many debtors refuse to comply with court orders, transfer assets to third parties in defiance of such orders and take whatever actions they deem necessary to frustrate the efforts of the collection attorney. It is at this stage that the collection attorney will ask the court to issue a permanent injunction ….. a very powerful equitable tool used by the court to impose its will on the recalcitrant party. Continue Reading

In the world of commercial finance, it is not unusual to encounter a lender who automatically seeks the guaranty of the applicant’s spouse. If a default subsequently ensues, the lender will pursue the guarantor spouse for payment of the principal obligor’s debt. Typically the paperwork is in order and the lender’s form of guaranty is quite thorough. What possible defense can be raised by the guarantor spouse to avoid liability?
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An extraordinary decision by the Michigan Court of Appeals should place asset protection planning at the forefront on the minds of all individuals who have outstanding nonrecourse guarantees of commercial loans. As a result of the decision handed down by the Court in the case of Wells Fargo Bank v. Cherryland Mall Limited Partnership, David Schostak and Schostak Brothers & Co. (December 27, 2011), real estate investors/developers employing nonrecourse commercial mortgage-backed securities (“CMBS”) loans now find themselves personally liable for any deficiency if the loan defaults. You are undoubtedly wondering: if these are nonrecourse loans how can the loan guarantors become liable for the unpaid debt?
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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.
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