Legal Services

BANKING & FINANCIAL LAW

Defaulted Loans: Workouts, Litigation and Bankruptcy

Our job is to improve the lender’s position as quickly and effectively as possible. Many factors determine whether a workout or a recovery through litigation is optimal in a given case. To guide our clients through these different approaches, we consider, among other things: the strengths and weaknesses of the loan documentation, lien priority issues, collateral quality, other recovery sources such as title insurers, and potential lender liability claims.

Regardless of the route our clients take, legal pressure on the borrowers and guarantors is often key to good solutions. Even in workouts, particularly ones that are slow-moving or uncertain, we often use lawsuits to impose deadlines on borrowers and guarantors to ensure timely cooperation. Even if the workout fails, the recovery of collateral or money has not been further delayed.

In workouts, we use a range of approaches, including, among other things: forbearances, confessions of judgment, deeds-in-lieu, voluntary foreclosure agreements, collateral turnover agreements, obtaining additional collateral from the borrower and/or guarantors, and lock-box arrangements.

In litigation, we reject cookbook approaches. Instead, we evaluate the unique circumstances of each case, and then design the strategy. In all cases, however, we focus on reaching the result rather than lingering in the process. Standard litigation produces standard results: delays, enormous legal fees, erosion of collateral values, and loss of assets to recover from guarantors. Defendant borrowers and guarantors relish these delays, and often work hard to create them. In response, Koepke Law generally serves discovery requests with the summons and complaint, files pleadings with the court simultaneously with serving the complaint to quickly get a judge assigned and a scheduling order. Further, we boldly protect our client’s collateral by aggressively using temporary restraining orders and prejudgment attachments, as appropriate.

In bankruptcy cases, we represent our bank clients against the competing interests of debtors, bankruptcy trustees and other creditors. Bankruptcy is litigation on steroids. Bankruptcy has short deadlines for creditors to assert claims and objections. We must therefore act quickly to protect collateral, to timely object to the debtor’s discharge for fraud and other wrongdoing, to timely object to property exemptions claimed by the debtor, to timely assert our client’s claims, to timely seek dismissal of bankruptcy cases and to meaningfully participate in reorganization plans.

Representing lenders in bankruptcy involves many different services, including: claim filing and claim allowance, lift stay motions, adequate protection motions, debtor-in-possession financing work, discharge objections, property exemption objections, case dismissal, case conversion as well as matters relating to approval and confirmation of reorganization plans.

A final word on lender representation in bankruptcy. Bankruptcy is not necessarily a dead-end to collection efforts against borrowers and guarantors. Many borrowers and guarantors, in fact, hope that a bankruptcy will cause lenders to retreat from their collection efforts. However, lenders often have meaningful ways to collect claims in bankruptcy. Our bankruptcy attorneys creatively search for ways to extract lender recoveries from bankruptcy debtors. Among other things, we carefully compare the debtor’s statement of assets, liabilities and income against the financial information previously provided by debtors when loans were made to determine if fraud occurred; we examine the debtor at the 341 Meeting and by deposition to see if fraudulent transfers of property occurred. We always move quickly to protect our client’s collateral.

Loan Documentation

We document loans for local, regional and national banks as well as finance companies and equipment lenders. We document relatively small deals as well as much larger deals in excess of $25M.

Documentation work regularly includes important due diligence services related to borrower business structures, lien priority issues, real estate title insurance review and related matters.

Our services are flexible to meet our client’s needs and budgets. Sometimes our clients merely need us to review existing loan documentation forms; other times they need documents created by us.

Depending on the complexity of the loan transaction, we complete our loan documents within a matter of days. Further, in almost all loan work, we provide the lender with a fixed legal fee before we begin work to avoid unpredictable hourly fees.