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6 Ways You Can Restructure Your Debts During and After Pandemic

May 08, 2020

Posted in Company Operating, COVID-19

Did you go into debt before the economy slowed down? With rates at historic lows many businesses took advantage of what looked like a great opportunity. But it may not look so good if your revenue has shrunk and re-payment looks difficult, if not impossible, now.

You may need to negotiate with your lender to get its cooperation. It’s not in their interest their loans go into default, leaving them with collateral whose value may be much less than what it was before the economic collapse. With a commercial loan workout and the cooperation of your lender, we may be able to work out several options for you:

  • Loan modification: Changed repayment terms (such as a reduced interest rate or a longer payment term), may give you the financial breathing room you need while improving the lender’s chances of full repayment. Your loan terms may be complex so negotiating a workable loan modification may be complicated as well
  • Forbearance agreement: This would allow the lender to preserve its rights while giving you time to cure the default. Your lender may be likely to agree to this if a foreclosure may not be enough to pay the loan. Under this agreement, the lender would delay the foreclosure for a time in exchange for you taking action to cure the default. You may list a property for sale, liquidate other assets to free up money to make the loan current, or secure other financing
  • Deed in lieu of foreclosure: You would sign the property deed over to the lender to satisfy the loan. If you want to move or consolidate your operations and free yourself from ongoing payments, this may be the way to go. Instead of standing by and allowing the lender to foreclose, a deed in lieu of foreclosure may allow you to be proactive and walk away from your commercial real estate loan. The lender may agree to this process because it’s faster and less costly than a foreclosure
  • Receivership: Your commercial mortgage agreement may have a provision allowing your lender to appoint a receiver if certain triggering events happen. Most receivers are appointed when the property is income-generating, like an apartment complex. If you default on the mortgage, the lender may pursue appointment of a receiver to manage the property and collect rents
  • Sale of pre-foreclosure properties: Like a deed in lieu of foreclosure, pre-foreclosure sales may resolve your outstanding debt while allowing both you and the lender to avoid expensive and time-consuming legal procedures. The terms of the pre-foreclosure sale should include what you need to pay beyond the sale price, or how long you will be able to keep possession of the property after negotiating the sale
  • Short sale of properties: If the value of your property has declined there it may not be enough to provide mortgage security (in other words, your mortgage is underwater). If you can’t keep up payments and sell the property you will probably still owe money on the loan. We may be able to negotiate a short sale where all the sale proceeds go to the lender, it accepts them in full satisfaction of the loan and you won’t be responsible for the unpaid balance

If you have questions about out of court loan workouts or restructuring or simply what to do with your creditors, schedule an appointment and talk to one of our attorneys ===> Click Here to Schedule an Appointment.