Everyone gets so upset over law suits and judgments entered against you. I understand it is not a pleasant experience, but really folks what does it mean? It means you REALLY owe the bank the money, where before you only owed it to them. Big difference? No. Sure, it may hurt your credit score a bit more, but chances are you are in need of a credit rehab program anyways and the debt relief is worth a credit ding which can be worked out later.

The second point is the bank does not want the property; just the judgment. A workout can be negotiated after a judgment is entered, no problem. We do it all the time.

So why do the banks spend the money to get empty judgments that seemingly mean little to anyone?

1. Sometimes they result in surprise settlements of significant value. People panic and fold into the bank's demands thinking the judgment means something very powerful. It’s amazing how that happens.

2. It is a natural reaction for the bank to protect its interests, get first in line and be ready to pounce should the opportunity ever make itself apparent. It makes sense from a bank's point of view but does not hinder the workout potential.

3. If there is to be a foreclosure, the law suit is fundamental and required, thus, the bank is simply preparing the paperwork as they may have to eventually liquidate the collateral by auction. Even though you may be talking settlement, the bank is getting ready if you fail. The bank does not want to waste any further time than it must based on the regulatory requirements of notice and response. Onward it churns.

4. Of course, finally, if the loan is an SBA guaranteed loan, then the bank must ‘exhaust' its legal remedies to liquidate the collateral, or risk losing the guaranty from the SBA. Thus, they sue and go for the judgment full steam ahead.

Is it so bad for the borrower? Not really. It will be worked out just the same. Its only value to the bank is positioning and for intimidation as well; that being the banks strategy. This is what banks do. It is their only avenue of protection and action. Hence, they do it.

The important point is it does not interfere with the opportunity to engage in a workout. In fact, now that we have the opportunity to deal with the bank counsel, it sometimes works out better as the bank's attorney sometimes recognizes a lost cause and often recommends a settlement that the bank has rejected.

Understand what is happening. Have a counter plan, a workout strategy, in motion and all will work out. If you fail to do this, your assets will eventually be liquidated.

Workouts are a tough road to take but a necessary tool for any business man to consider when required. What option do you have? Debt can kill you faster than anything else.