Chapter 20 Bank Checklist: Distressed Customers

• Jurisdiction: United States

Chapter 20 Bank Checklist: Distressed Customers

Note: This checklist addresses issues that depositories and lenders should consider when they have a distressed customer and does not include other internal approval, legal or regulatory issues or give legal advice toward resolving those issues. It also does not address all of the issues that may arise for the bank in its role as a secured lender. Consult bankruptcy professionals for a complete list.

[ ] 1. Review entire credit and loan files for complete loan documentation package, organization chart, loan history and trends leading to financial decline.

a. Look at record searches; are all public filings up to date?
b. Look at loan and account history. If past due, can payments be made to bring the account current or erase overdrafts? If not, send a reservation-of-rights letter to protect the bank's interests.
c. Chart all exposures at the institution so that the bank can make a coordinated approach to the customer.
d. Visit with the customer and visit at the customer's site to verify that the business remains real and operating.
e. Engage appropriate counsel.

[ ] 2. Confirm how the cash-management system works.

a. Identify all accounts at the bank, their types and any cash-management products attached to them.
b. Gather the debtor's deposit account, credit card and applicable treasury-management agreements.
c. Obtain any applicable deposit account control agreements.
d. Identify any letters of credit.
e. Obtain or create a diagram of the cash-management system.

[ ] 3. Gather internal information and data, including:

a. the debtor's credit limits and historic levels of usage of treasury-management services;
b. historic data on number and amount of credit card chargebacks and returns;
c. historic deposit account balances;
d. whether the bank is a depository approved by the Office of the U.S. Trustee for the district in question, and if not, whether the bank wishes to become one;
e. the most recent report from the bank to the Office of the U.S. Trustee concerning bankruptcy estate funds maintained at the bank; and
f. whether any additional collateral must be provided to the Office of the U.S. Trustee to remain in compliance with § 345 if the debtor maintains funds at the bank.

[ ] 4. Have the following discussions with the debtor (pre-bankruptcy, if possible):

a. What are the debtor's and bank's intentions with regard to the continuation of the relationship post-bankruptcy: terminate or continue? This

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