Negotiating with a Bank: Why do I have to Provide My Financials?

The attorneys in my Law Firm represent clients against banks and other creditors on a regular basis. Whether it’s in a civil lawsuit, a foreclosure case, a situation which has not yet reached the litigation stage, or a post-judgment matter, negotiations just about always take place. In most all of these cases, we have a conversation with our client like the one below when the time comes to discuss the settlement offer I’m going to make on behalf of the client.

ME: In order to consider a settlement offer, the bank is requiring you to fill out this financial worksheet return it and to provide records such as your most recent 2 months of bank statements – complete, every single page, even the very last page of the bank statement which essentially says nothing.

CLIENT: Well, I don’t want to do that.

ME: I don’t blame you, I wouldn’t want to do it either.

CLIENT: So I don’t have to do it?

ME: Well, you don’t have to do anything – at least not unless there’s a court order or similar that says you have to do it. There’s no court order here which says you have to provide your financials.

CLIENT: Well that’s good.

ME: I agree.

CLIENT: Why does the bank want this stuff?

ME: Mostly so it can make an informed decision as to whether it makes sense to settle – and at what amount – versus pursuing you through the legal system for the full amount. Also, these creditors want to know if you can pay but don’t want to, or truly cannot pay, at least not right now. Of course, they can come after you for years, sometimes even decades. Also, if no settlement is reached, they want a head start on knowing what there might be for them to collect and where it is.

CLIENT: So if I provide my financials, they might use that information against me.

ME: This is true. I hope it doesn’t come to that, and we’re going to work hard to avoid that.

CLIENT: So what happens if I don’t provide my financials?

ME: If you don’t provide them, the bank is not going to consider any settlement offer and/or will assume that you have plenty of money and can pay the entire amount claimed.

CLIENT: Yes but how can the bank make me provide the financials?

ME: Again, at this stage they can’t “make” you – it’s up to you, you can decide what to provide and what not to provide. This is a voluntary negotiation, and each side can more or less choose to do – or not do – what it wants. That means you can decide not to provide your financials, but the bank can then decide not to negotiate with you.

CLIENT: I need to settle this case.

ME: Unfortunately, then, you probably need to provide your financials.

CLIENT: <sigh> Ok.

ME: Don’t worry, we’ll take a look at everything first, analyze how it may impact the settlement negotiations, and bring you up to speed on that before anything gets sent out – for now it’s confidential and privileged between you and us until and unless you direct us to share it with the bank or anyone else.

Also, we’ll make sure that what we are send to the other side is done so as part of confidential, privileged, and non-admissible settlement negotiations. That will make it harder for the bank to use it against you later, or limit the ways the bank can use it, if a settlement can’t be reached.

CLIENT: This kind of sucks, but I guess I feel a little bit better about it than I did a few minutes ago.

ME: I wish you weren’t in this situation, but we’ll do what we can do. We can never guarantee how a case will go or what the end result will be – nobody can, and we’re not allowed to do that anyhow – but it’s pretty rare that we can’t get something worked out on behalf of a client.

CLIENT: Ok, I’ll get this financial data back to you later this week.

ME: Great, thanks. We’ll look it over and get back to you with further advice within a few days of you providing that to us. Hang in there.