Posted by Hecht Walker, P.C.
One of the many areas of law practiced at Hecht Walker is creditor representation. Though this area of law is by no means glamorous nor subject to much conversation at social events, it can be satisfying if done properly. Principals at Hecht Walker have decades of experience in creditor representation.
In simple terms, creditor representation is attorney representation of a client, such as a financial institution, credit company, individual, private entity or private investor, in the collection of debt owed to the creditor. This representation includes representing the lender in:
- bankruptcy
- commercial real property foreclosures
- enforcing Notes and Guaranties by suit and other means
- personal property foreclosures
This representation can include several other remedies available under Georgia law that allow the creditor to either regain its collateral which secures the loan, or alternatively, regain the funds loaned back from the borrower.
When a law firm is retained for this purpose by the creditor, the first step for the attorney is to review the creditor’s documentation to ensure that the creditor is in a proper position to enforce the debt instrument. Also, the review is important to determine if the creditor maintains the rights which it believes it possesses. Throughout the years, we have seen several notes, security deeds, and related collateral instruments which do not allow for the rights or enforcement of rights which the creditor believed it maintained.
The initial review may show flaws in the documents, process malfunctions at the closing, or plain oversights. For example, an assignment to the creditor may not have been properly filed, or a Promissory Note or Security Deed may not have been properly executed. Similarly, a security interest may not have been properly reflected in the Security Deed, or a UCC-1 Financing Statement may not have been properly filed. We have seen a host of similar potential problems which must be addressed before enforcing a debt or foreclosing on a commercial property.
After the documentation has been reviewed and it is confirmed that the client is in fact in the position that they believe that they are supposed to be in to enforce the debt, the next question for the client is how do they want to proceed in the collection of the debt. Often a creditor will have a security interest in real property through a Security Deed which secures a Promissory Note in favor of the creditor. Assuming the Security Deed has the appropriate language in it to allow for a non-judicial foreclosure, then, a real property foreclosure would be an obvious remedy available to the creditor. However, is this the best remedy available to the creditor?
In making a determination as to whether or not to foreclose, the creditor must consider the value of the property, the financial stability of the borrower, whether the Promissory Note has matured, and how delinquent the borrower is. Often a borrower would be in a better position to sell the property, as opposed to the creditor after foreclosing on the property, because the borrower is more familiar with the property. Also, the foreclosure sale of the property to the creditor could substantially affect the marketability and value of the property.Thus, if the borrower is not too far in default, it may be advisable to allow the borrower some time to attempt to market and sell the property prior to initiating the foreclosure. This step may also allow the creditor to avoid the need for dealing with the borrower and the property in bankruptcy .
If it is determined through financial statements of the borrower that the borrower has the means to pay the debt and just is refusing to do so, filing suit on the Note may be a better alternative to foreclosing upon the property. However, if there is substantial equity in the property over and above the debt owed to the lender, foreclosing on the property may be the best remedy.
From the experience of Hecht Walker creditor representation lawyers, it appears that most lenders want to find some type of resolution short of filing suit, or alternatively foreclosing, so long as the borrowers are in communication with the creditor and are making a good faith effort to work with the creditor to resolve the situation. If the borrower is not communicating, then the creditor will have no other alternative but to proceed as referenced above.
Creditors should note that when this market does turn around and there are in fact borrowers willing to borrow money, the way in which creditors have treated them in the past will certainly alter their thinking as to where they want to borrow money in the future. As creditors/lenders are in the business of lending money, this effect is an important point to bear in mind during the foreclosure, work-out or suit on note stage.
In over two decades of creditor representation, Hecht Walker credit representation attorneys have successfully handled thousands of creditor representation matters. If your business needs assistance with creditor representation in debt collection including but not limited to note and guaranty enforcement, foreclosures or assertion of claims in bankruptcy, then we would enjoy the opportunity to assist you at 404-348-4881.
Attorney Mark Walker is a partner at the law firm of Hecht Walker. In close to 30 years as an attorney, he has represented banks, creditors, lenders, landlords, businesses and individuals in foreclosure actions, in lender liability matters and in bankruptcy proceedings. Mark has handled thousands of foreclosure matters during his career, and has represented lenders and creditors in federal bankruptcy courts.
