Book Details

Strategies for Secured Creditors, Second Edition

By Patrick E. Mears, John T. Gregg, and Timothy S. McFadden

  • ONLINE: 2012
  • Online
  • 302 pp.
  • $129.00

Find out what the key choices are for your creditor clients, and the best strategies for recovering loans gone bad, with Strategies For Secured Creditors, Second Edition


Secured creditors generally have choices when dealing with delinquent loans—and choices mean that the creditors have to consider strategies. What is the best way for the creditor to recover the principal (and as much interest as possible, not to mention other expenses permitted by the loan agreement) from the delinquent borrower? Is it a workout? A rapid plunge into foreclosure? Are there other options?

In this second edition of an ALI CLE bestseller, Patrick E. Mears, John T. Gregg, and Timothy S. McFadden explore the strategies available to secured creditors when their borrowers are in trouble. The authors—two partners and an associate, respectively, in the national law firm of Barnes & Thornburg LLP, all focus their practices on finance, insolvency, and restructuring of commercial enterprises. They bring their experiences to play in this book, where they explore:

How foreclosures are done

The differences in procedure—and results—between consensual workouts and Chapter 11 reorganizations

How to spot the early warning signs of borrower financial distress

Who the key players in a workout are, and how to mobilize them

The differences in foreclosure processes that apply to real vs. personal property

How to sell secured loans

The special case of auto supplier insolvencies



Throughout Strategies For Secured Creditors, Second Edition, the authors focus on practical, how-to solutions for creditors and their counsel. They back up their recommendations with 24 forms and checklists that purchasers of this book can download from the ALI CLE website.

Among the available forms:

Pre-Workout Agreement

Term Sheet

Subordination Agreement

Forbearance Agreement (Real Estate Loan)

Forbearance Agreement (Bank Credit Agreement)

Checklist For Secured Parties Upon Debtor’s Default

Table Of Remedies Under Revised Article 9

Notification Of Disposition Of Collateral (Commercial Collateral)

Mortgage Default Clause

Assignment Of Leases And Rents

Foreclosure Complaint

Agreement For Deed

Warranty Deed

Mortgage Asset Purchase Agreement

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About the Author

PATRICK E. MEARS is a partner in the Grand Rapids, Michigan, office of Barnes & Thornburg LLP and chair of the firm’s Finance, Insolvency and Restructuring Department. Mr. Mears concentrates his practice in insolvency, workouts and restructurings, commercial finance, securitizations, and creditors’ rights. He represents financial institutions as individual creditors and as members of loan syndicates in matters throughout the country. Although his primary practice is representing financial institutions as secured and unsecured creditors, he also represents debtors and creditors committees in bankruptcy cases and out-of-court workouts. Mr. Mears is an elected fellow of the American College of Bankruptcy and an elected member of the American Law Institute. Mr. Mears is formerly the chairperson of the Real Estate Financing Group of the American Bar Association’s Real Property, Probate and Trust Law Section and is currently chair of the Uniform Commercial Code Committee of the Michigan State Bar’s Business Law Section. He was the lead author of Strategies for Secured Creditors in Workouts and Foreclosures, the first edition of this book.



JOHN T. GREGG is a partner in the Chicago and Grand Rapids, Michigan, offices of Barnes & Thornburg LLP. Mr. Gregg focuses on corporate restructuring, bankruptcy, and insolvency law. He has experience representing debtors, lenders, committees, trustees, asset purchasers, lessors, and other parties in interest in some of the country’s largest and most complex restructuring matters. Mr. Gregg serves as the co-chairperson of the Bankruptcy Committee for the Real Property Law Section of the Michigan State Bar and is also a member of the American Bankruptcy Institute’s Central States Advisory Board. Mr. Gregg is a frequent writer and speaker on bankruptcy issues. He has written and co-edited numerous articles and other publications, including Issues for Suppliers and Customers of Financially Troubled Auto Suppliers, published by the American Bankruptcy Institute, Michigan Security Interests in Personal Property, published by the Institute for Continuing Legal Education, Handling Consumer and Small Business Bankruptcies in Michigan, published by the Institute for Continuing Legal Education, and Collier Guide to Chapter 11, published by LexisNexis.


TIMOTHY S. MCFADDEN is an associate in Barnes & Thornburg LLP’s Chicago office and a member of the firm’s Finance, Insolvency and Restructuring Department. Mr. McFadden concentrates his practice on matters related to bankruptcy and restructuring, creditors’ rights, commercial finance and workouts, and commercial litigation. Mr. McFadden is a member of the American Bankruptcy Institute and the Chicago Bar Association. He has also been involved with the Turnaround Management Association, Lymphoma Research Foundation, the Notre Dame Alumni Association, and the Chicago Coalition for the Homeless.


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Table of Contents

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Abbreviated Table of Contents

Chapter 1 Overview
    §1.01 Introduction
    §1.02 Brief Description Of The Workout Process
    §1.03 Brief Description Of The Foreclosure Process
    §1.04 Workouts And Foreclosures In America: A Brief History
    §1.05 Consensual Workouts Versus Chapter 11 Reorganizations
    §1.06 Descriptions Of The Players And Their Roles
    §1.07 Secured Creditors Strategies And Goals In Workouts And Foreclosures
Chapter 2 The Workout Process
    §2.01 Early Warning Signs Of Financial Distress
    §2.02 Secured Creditor Responses
    §2.03 Transition; Meeting With Borrower
    §2.04 Conclusion
    §2.05 The Forbearance Agreement
    Form 2.1 Recitals
    Form 2.2 Pre-Workout Agreement
    Form 2.3 Term Sheet
    Form 2.4 Subordination Agreement
    Form 2.5 Forbearance Agreement (Real Estate Loan)
    Form 2.6 Forbearance Agreement (Bank Credit Agreement)
Chapter 3 Foreclosures Of Personal Property Collateral
    §3.01 In General
    §3.02 Rights Of A Secured Party Upon Default
    §3.03 Prohibited Waivers
    §3.04 Judicial Enforcement
    §3.05 Execution Sales
    §3.06 Real Property And Fixtures
    §3.07 Repossession Rights Of Secured Parties
    §3.08 Breach Of The Peace
    §3.09 Assembly Of Collateral
    §3.10 Removal Of Fixtures
    §3.11 Duties Of Secured Party In Possession Of Collateral After Default
    §3.12 Direct Collection Of Rights Of Secured Parties
    §3.13 Collection Of Funds In Deposit Accounts
    §3.14 Commercial Reasonableness Standard
    §3.15 Nonjudicial Enforcement Of Mortgages
    §3.16 Expenses Of Collection And Enforcement
    §3.17 Disposition Of Collateral After Default
    §3.18 The Secured Party’s Power To Sell, Lease, Or License
    §3.19 Commercial Reasonableness Standard
    §3.20 Redemption Rights
    §3.21 Notice Of Sale Or Other Disposition—Nonconsumer Goods
    §3.22 Persons Entitled To Notice
    §3.23 Timeliness Of Notice
    §3.24 Contents Of Notice
    §3.25 Consumer Goods
    §3.26 Purchases Of Collateral At Public Or Private Sales
    §3.27 Implied Warranties And Their Disclaimer
    §3.28 Rights Of Transferees
    §3.29 Transfer Statements
    §3.30 Assignments Of Secured Debt To Secondary Obligors
    §3.31 Dispositions Of Collateral To Secured Parties And Others
    §3.32 Application Of Cash And Noncash Proceeds—Cash Proceeds
    §3.33 Noncash Proceeds
    §3.34 How Surpluses And Deficiencies Are Calculated In Consumer Transactions
    §3.35 Strict Foreclosure
    §3.36 Acceptance Of Collateral By The Secured Party—By Obtaining The Debtor’s Consent
    §3.37 Effect Of Strict Foreclosure
    §3.38 Role Of Good Faith
    §3.39 Special Rules For Consumer Transactions
    §3.40 Consequences Of A Secured Party’s Noncompliance With Revised Article 9
    §3.41 Aggrieved Persons
    §3.42 Minimum Damages In Consumer Goods Transactions
    §3.43 Supplemental Damages
    §3.44 Recovery Of Damages When Deficiency Is Reduced Or Eliminated
    §3.45 Limitation Of Security Interest Caused By Noncompliance
    §3.46 Rebuttable Presumption Rule In Actions Involving A Surplus Or Deficiency
    §3.47 Nonconsumer Transactions
    §3.48 Consumer Goods As Collateral
    §3.49 Determining The Commercial Reasonableness Of A Secured Party’s Actions
    §3.50 Safe Harbor For Secured Parties
    §3.51 Exculpation From And Limitation Of Liability Of Secured Parties
    §3.52 Foreclosures Of Liens In Personal Property Under Other Law; In General
    §3.53 Enforcement Of Liens In Personal Property Under Federal Law
    §3.54 Enforcement Of Liens In Personal Property Under Non-UCC State Law
    Form 3.1 Checklist For Secured Parties Upon Debtor’s Default
    Form 3.2 Table Of Remedies Under Revised Article 9
    Form 3.3 Notification Of Disposition Of Collateral (Commercial Collateral)
    Form 3.4 Notice Of Our Plan To Sell Property (Consumer Collateral)
    Form 3.5 Explanation Of Calculation Of Deficiency
Chapter 4 Real Estate Mortgage Foreclosures And Related Remedies
    §4.01 Initial Considerations And Applicable Law
    §4.02 The Real Estate Lender’s Post-Default Checklist
    §4.03 Determining Lien Value And Foreclosure Sale Bid Price
    §4.04 Pre-Foreclosure Remedies: Assignments Of Rents And Receiverships
    §4.05 Foreclosure By Judicial Action
    §4.06 Strict Foreclosure Of Mortgages
    §4.07 Foreclosure By Power Of Sale
    §4.08 Deeds In Lieu Of Foreclosure
    Form 4.1 Bid Sheet
    Form 4.2 Mortgage Default Clause
    Form 4.3 Assignment Of Leases And Rents
    Form 4.4 Order Appointing Receiver
    Form 4.5 Foreclosure Complaint
    Form 4.6 Foreclosure Judgment
    Form 4.7 Agreement For Deed
    Form 4.8 Warranty Deed
Chapter 5 Syndicated Credit Workouts
    §5.01 Introduction
    §5.02 Communications, Decision Making,
    §5.03 Document Review And Document Revisions—Special Concerns In The Syndicated Credit Agreement
    §5.04 Forbearance Agreement Considerations
    Form 5.1 Joint Defense And Confidentiality Agreement
    Form 5.2 Acknowledgment
    Form 5.3 Consent Of Secured Lenders
Chapter 6 Sales Of Secured Loans
    §6.01 Introduction
    §6.02 Types Of Loans
    §6.03 Mechanics Of Loan Sales; General Considerations
    §6.04 Seller’s Due Diligence Prior To Sale
    §6.05 Buyers’ Due Diligence Prior To Purchase
    §6.06 Sale Negotiations
    §6.07 Post-Closing Concerns Of Buyers
    Exhibit A Checklist
    Exhibit B Mortgage Asset Purchase Agreement
Chapter 7 Auto Supplier Insolvencies
    §7.01 Introduction
    §7.02 Brief Description Of The Automotive Industry
    §7.03 Issues Unique To Automotive Suppliers
    §7.04 Common Causes Of Financial Distress
    §7.05 Warning Signs
    §7.06 The Lender’s Position And Goal
    §7.07 The Parties
    §7.08 Strategy
    Form 7.1 Accommodation Agreement

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