Drafting Errors Routinely Cost Lenders’ Post-Bankruptcy Attorney’s Fees and Interest
Lane Powell Attorneys Chuck Ekberg, Bruce Leaverton and Kay Lennon co-authored an article in the Spring 2013 issue of Community Bankers of Washington’s (“CBW”) Community Banker magazine titled “Drafting Errors Routinely Cost Lenders’ Post-Bankruptcy Attorney’s Fees and Interest.” In the article, Ekberg, Leaverton and Lennon discussed the importance of comprehensive loan documentation, as well as the costs associated with poorly drafted loan documents.
When a bankruptcy intervenes to prevent the continuation of a restructuring or loan enforcement effort, it is too late to supplement or strengthen loan documentation. Lenders are then stuck with what is — and sometimes more significantly — what is not in their existing loan documentation. Unfortunately, critical loan enforcement remedies and claim amounts may depend on not just the underwriting decisions relating to the loan itself or the value of any pledged collateral, but also on the scope and precision of what is sometimes derisively referred to as the “boilerplate provisions” in loan documents.
Sometimes lawyers prepare documents that contain paragraphs of mind-numbing complexity over simple, direct language. However, in the context of post-default loan enforcement, simple and direct language is at the core of the problem, resulting in omission or inadvertent waiver of important rights when the time comes to enforce the loan.