You are a hard worker who built your business from the ground. It has been successful for a number of years. Your business is almost like your child. You sacrifice to ensure its success. What if one day you fall behind on your mortgage payments and your baby faces foreclosure? What do you do?
What is a foreclosure?
Foreclosure is not something you think about happening when you start your business. Foreclosure is a legal process where the lender tries to recover the balance of a loan from the borrower. It is done if the borrower stops making payments to the lender and the lender is then free to sell the property. Before moving forward, the lender gives you time to pay whatever the amount is that you owe. If you do not then the lender can move forward with the foreclosure. However, you have rights as a business owner. It can depend on the terms of your lease and the actual date that the lease was signed. The banks cannot evict you from the property without filing a foreclosure.
There are usually two types of foreclosures but it depends on which state you live in. They are:
- Judicial foreclosure- this type of foreclosure goes through the court system. This means that a lawsuit has been filed by your lender and you must go to court. The lender is looking to receive a foreclosure judgement and an order for sale. The Judicial foreclosure is the preferred method in many states.
- Nonjudicial foreclosure- this type of foreclosure is done outside of a courtroom. The lender may proceed if the loan documents contain a power of sale clause. That power of sale allows a trustee to sell the property without supervision from the court.
If your business ever faces a possible foreclosure, it is good to know your options and rights as a business owner.