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Debtor and Creditor Workout New Mexico, Part 2

This post is the second in a two part series on debtor and creditor workouts. If you haven’t already read part 1, I reccomend you do so before continuing.

Disadvantages of a debtor and creditor workout (cont.)

There are certainly situations where an individual or business is too far underwater to expect a workout to save them from bankruptcy. In these cases, attempting a workout would likely just waste time and delay the inevitable bankruptcy filing.

Debtor and creditor workout for an individual

Debtor and creditor workouts are often a good tool for individuals, as they tend to only have a few creditors. A debtor and creditor workout doesn’t need to involve more than one creditor. If only one creditor is involved, the workout is known as a loan workout. One example of a time an individual may want to negotiate with an individual creditor is in the case of a mortgage modification.

Debtor and creditor workout for a business

Whether a debtor and creditor workout is the right choice for a business is a bit more complicated question. If a business has many creditors, a workout may not be the right choice, as a large group of creditors are less likely to all agree to the terms of an agreement. If the business only has a few creditors; however, a workout may be a good choice.

It’s important to remember that, generally speaking, creditors want to work with their debtors to help them succeed. When a loan moves from what bankers call the line to the workout section of their balance sheet, federal regulations typically require that they hold 100% of the loan amount on reserve in anticipation of the loan defaulting. Obviously, this gives them incentive to get as many non-performing loans back to their original status as possible.

Find out if a debtor and creditor workout is right for you

Only an experienced financial professional can tell you if a debtor and creditor workout is the right choice for you. Don Harris has over 20 years of experience practicing financial law in New Mexico. Call today to set up a consultation.

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