Do not do your own workout. Workouts, like brain surgery, are life-threatening and require extreme expertise and skill to be accomplished successfully. I won’t even comment on doing your own brain surgery. Basically, the two are on the same level of danger. A workout is not a typical everyday activity of a small business and it requires skills and experience not typically available to the business owner or their accountant or lawyer.

The logic of a workout is frequently opposite to the logic of good business. Appropriately, the term we use to identify a business that requires a workout is “upside-down”, so it makes sense that the workout or resolution of your issues are also upside-down or backwards to traditional business thinking. Do not use your situation as an opportunity to learn workouts as you may not get a second chance to get it right.

Typically, a workout is resolution of debt for less than what is owed, with forgiveness of the shortfall (that portion not collected). For many reasons beyond lack of skill and technique, you should not attempt to negotiate your own workout. First of all, you’re the bad guy. You owe the debt, incurred the obligation, used the services or products, have failed to pay on a timely basis and now you want to settle this matter with a compromise. This does not play well with most creditors. They become emotional about being beat by you–the user and debtor–so the response is usually less than positive, preventing the best results possible.

A third party, presumably a professional who is experienced in these matters, is what you need in your corner representing your needs. You need a professional who knows how to present the situation and who further knows what will work and who can creatively design a resolution despite it being a deep discount for the offending debtor. Lawyers cannot do this job effectively because a lawyer can only deal with another lawyer and that requires the workout to be muffled and interpreted twice before the debt holder gets the story and has an opportunity to decide what he wants to do. This seldom works well at all. Direct contact is far more successful. The accountant looks at this as out of his realm, not a job he wants to do, a little too messy for his taste. It’s a bit of a street fight and a lot of theater. While in the end everyone agrees, there is much required to reach a satisfactory conclusion.

What can one expect in a workout? Magic, if handled by a skilled workout practitioner. The IRS can be compromised dramatically, for pennies on the dollar, even 941s.
Credit cards can be reduced by approximately 70%. Under the right circumstances, the first secured party bank debt (mortgages or notes, lines of credit, etc.) can be dramatically reduced and the subordinate secured parties get little. Unsecured trade debt will be gone completely under most circumstances. Judgments from lawsuits are reduced dramatically, if not completely, depending on their place in line. Personal guaranties are usually significantly reduced.

Can you imagine having issues with all the above? This is typical of an upside-down business. The battles are absorbing too much of your time and all of your cash, preventing meaningful growth and development and forcing a downturn that is likely to end in disaster. But, it can all be virtually eliminated without bankruptcy, without lawyers, quickly and efficiently, without you even being involved. It’s a business strategy, a workout done by a professional.

Last time we checked, my organization has been responsible for negotiating the forgiveness of over $200 million worth of debt on behalf of our clients, providing them with a real second chance in business without any of the obstacles threatening them now or preventing their reemergence as a viable successful business entity. Everyone is entitled to a second chance. If the business is worth saving, it’s worth working the debt out rather then being bled to death, losing all and going out of business. This approach is far better than bankruptcy for the following reasons:

1. Bankruptcy takes a year, while a workout can take a month.
2. A good workout resolution is more effective in reducing debt and less costly than bankruptcy if you want to keep your business and personal assets.
3. Bankruptcy is a long-term self-liquidation plan. Most Chapter 11s are eventually converted to Chapter 7s and all is lost, both business and personal as well. A workout is a short-term rehabilitation program and protects all your assets, including your core business.
4. In bankruptcy, the Trustee is in control, not you. His interest is in protecting the secured parties and IRS first, the unsecured second and then the debtor. In a workout, your representative has one goal–to reduce your debt and protect your assets.
5. In bankruptcy, the court wants to pay the creditors as much as possible and then forgive the remainder. In a workout, the workout representative is trying to reduce the debt as much as possible, pay as little out as possible and then have the remainder forgiven. That’s a huge difference in approach and results.

After presenting my view of the workout scenario, clients frequently say to me, “It is too good to be true,” or “Why didn’t I meet you a year ago?” You are one phone call away from meeting me and talking with me about your workout potential. I await your call and the opportunity to explain your options and alternatives. It is true, I can do this and have done it a hundred times before, safely and securely and intelligently. A workout done well is a win for both sides, but more for the debtor as he has a lot more to lose than the lender. Well done, a workout it is a thing of beauty, as everyone who has gone through the process can attest. Call me for help at 413-584-2581.