When in default, do not believe your banks threats or instructions are in your best interest! Ignore them, do what is best for you.
I see it all the time, banks ‘instructing’ its defaulting or late paying borrowers to liquidate themselves for the benefit of the bank. This is silly and you should never take these instructions seriously unless you have negotiated some advantage for yourself. Te threats are even sillier.
Typical of the bank is to instruct you to pay your receivables over to the bank as you collect them, instead of paying payroll or paying unsecured creditors. NO!
They may request or demand, that you make sizable payments against your principle balance or suffer default and the calling of your note. NO!
They may demand additional collateral or your spouses signature and additional guarantors. NO!
They may demand that you liquidate inventory. NO!
Here is the point. The bank may have the right to call your note, demand payment and liquidate your assets after proper court proceedings and notice to you.
That’s ok, they have their rights and are entitled to implement them following all the laws and requirements which protect you the borrower as well as the bank.
However short of them effecting their legal rights in a legal way, there is no plausible reason to ‘cooperate’ with their liquidating requests for you to voluntarily submit yourself to self liquidation, unless you have negotiated some beneficial return for this cooperation.
Their threats are empty, they need to either do it correctly or not at all, and any effort to get you to liquidate yourself should be rejected out of hand as it provides no benefit to you whatsoever.
Alternatively such aggressive communication from the bank clearly indicates their intent is to end the relationship and they are merely trying to reduce their losses. This means you need a plan that best serves your needs at this precarious moment and not voluntarily acting in the banks best interest benefiting the banks position by cooperating with a self liquidation plan without any promises or benefits in return.
Don’t do it. It is already a bad situation and cooperation will not benefit you or the relationship, it will simply reduce you to self liquidation for the sole benefit of the bank. Thus when this occurs it is time to seek help and design your workout plan, as that is the best approach for you. It is either self liquidation, a liquidation by the bank, or a workout plan on your terms, initiated by you with a clear plan in hand that benefits you as well as the bank.
Resist the temptation to cooperate, thinking that this will have a positive influence on the end play. NO, all it does is get you out of business, get the bank a little extra cash and remove any negotiating power you may have.
There are many possible beneficial workout opportunities that may include survival of your business and the reduction of debt, as opposed to self liquidation.
One final thought, when the bank moves you into their workout department, it is really the liquidation department. No one ever comes out of the workout department with a business. You will be liquidated, thus when you hear this word hire your own workout specialist and begin to fight for your survival.
Get help if you need it, whatever you do, resist the temptation to cooperate because it seems like the only thing you can do. Initiate your own workout plan using your own representative.
