Character Is An Important Element Of A Successful Workout
Character is a very important quality for supporting a successful workout. Who would ever think one’s character is relevant in determining the viability of a workout request? Well, it is a very important aspect and it goes like this:
When a bank sees a borrower in default working very hard to selflessly support a best-case conclusion for the bank, this shows character. From a banker’s point of view, if character is demonstrated by selflessly sacrificing one’s self, communicating effectively and cooperating with the process, then the defaulting borrower deserves a better deal–a break. In the eyes of the banker, the borrower in default is trying to minimize the bank’s loss and improve the bank’s position and collection results. This shows character, the type the banker wants to reward or at least cooperate with.
Going out and buying a new car within the workout time frame does not demonstrate the type of character a bank wants to see. Maintaining an expensive country club membership does not demonstrate the type of sacrifice a banker wants to see. Disappearing receivables and shrinking inventory assets that somehow disappear without compensation to the bank does not demonstrate the type of character the banker wants to see. Automatic contributions into one’s 401k or IRA will not work. Young children in private schools are not appreciated. Last minute estate planning which removes assets preventing collection or liquidation efforts is not the way to go.
A workout is not a right, it is an opportunity the bank may offer to a defaulting borrower. However, if the banker does not feel the borrower is acting appropriately, he has the ability to sandbag the workout, reducing its value and increasing the cost dramatically to the defaulting borrower. The concept of appropriate character is all about the borrower in default demonstrating a sense of responsibility for the situation and acknowledging the bank’s superior position and supporting the bank’s efforts to recapture as much as possible. This cooperation shows quality character and supports the banker’s willingness to go to bat for the borrower and support his workout deal. If the borrower is shifty and devious, utilizing all the above to reduce the bank’s eventual collection and recovery, then the banker could very well work against the workout effort. Show great character and the banker will support you completely.
The challenge is to demonstrate character without giving up more than you have to, thus winning on both ends. That’s the challenge. It can be done if you use your head and make good decisions. That is why you need an experienced workout representative who understands the nature of the deal and supports the bank adequately while making certain the borrower gets out with as much as is reasonable under the circumstances.
As workout specialists, we do not have to lay down and roll over for the bank but we must demonstrate character by treating the bank appropriately and respecting the process. It can be done, we do it every day and we help our clients demonstrate the type of character needed to succeed at our workouts. Frequently, we as the representative can overcome our client’s bad behavior and replace the defaulting borrower’s poor character with our own better character. This works also. It is important–very important–as it is a fine line that separates good character from giving too much. We can help you make the right moves.