A Workout Result Is Not About What You Can Afford

…it is about what the ‘rules’ dictate.

Yes, there is much horse-trading, bickering, bluffing, bargaining and gamesmanship involved in a workout, as is true with any negotiation. This, of course, is a reality that applies to every workout. But just as real is the need to understand the process and negotiate along certain guidelines or it won’t work.

One must be able to invest in a workout as it costs money to settle. No matter how broke you appear to be, you had better have the necessary resources to settle or there can be no workout at all. You cannot expect to walk away for nothing. Depending on the size of the debt, the resolution may be pennies on the dollar. On a large loan that may still be a sizable amount and it must be paid or there will be no deal.

It’s a bit inconsistent but it’s what works. We show them how broke you are, how much in debt you are, how there is no revenue available for any possible monthly debt service on a note, and then you are expected to pay some amount, whatever is negotiated, magically, mystically, but very definitely.

Just as magically, borrowers in default, when provided with a meaningful workout conclusion–let’s say seven cents on the dollar–will somehow find the $50-$75,000 needed to pay for the release and forgiveness of the shortfall. Magically they find it, beg it, borrow it, somehow arrange for it, but it gets done. If the borrower in default truly wants the forgiveness bargained for, he must pay for it. Whether he can afford it or not is not the issue.

A workout takes a bit of finesse and some good theater, but also a deep understanding of the process and rules that govern the exchange and the results as well as expectations that are in line with reality. This is what a workout requires, and one must pay for a workout.