If you face foreclosure on your commercial property, do not hesitate to contact Bradford Law Offices to learn about your options. You might qualify to file for bankruptcy to prevent creditors from coming after you for payment of the money you owe. We can determine which type of bankruptcy could work best for you and guide you through the entire process.
When you can’t make payments on your property, your lender could decide to pursue foreclosure. This type of legal action could put your business at risk and possibly force you to shut down operations. You want to avoid losing the company you worked so hard to build but don’t have the money or assets to afford the past due payments.
At Bradford Law Offices, we understand the challenges of resolving your debt while running a business. When you rely heavily on real estate to turn a profit, you need to ensure you don’t lose your property to foreclosure. Filing for bankruptcy might be the most effective method of protecting your business and reorganizing your finances.
Our Raleigh bankruptcy attorney for real estate foreclosures is ready to represent you in your bankruptcy case. Depending on whether you meet eligibility requirements, you could file for Chapter 7, 11, or 13 bankruptcy as a business. Our legal team can review the foreclosure details and determine how to proceed with your case.
Requirements for Lenders to Pursue Foreclosure
A lender can initiate a foreclosure proceeding if a real estate owner falls behind on their mortgage payments. After the foreclosure process concludes, the lender can resume control of the property and auction it off for sale. The highest bidder can take possession of the property, leaving you without the land or buildings you need to run your business.
Lenders must comply with a range of requirements before proceeding with foreclosure on commercial property. Contact Bradford Law Offices to discuss your rights if you or your business are facing foreclosure. Filing for bankruptcy relief will halt most foreclosure proceedings, giving you and your business time to reorganize and save your property and business.
How the Foreclosure Process Works in North Carolina
Lenders can use a nonjudicial or judicial method if a business owner defaults on their real estate mortgage.
A judicial foreclosure starts with a lender filing a lawsuit. The court can permit them to proceed with a foreclosure sale on the property. You must respond to the lawsuit with a written answer, or the lender will win the case automatically.
If you choose to fight the foreclosure, the judge will review all available evidence to determine whether they rule in your favor or the lender’s favor. If the lender wins the case, the judge will issue a judgment for your property to go up for auction.
The lender must complete out-of-court procedures if they choose to initiate a nonjudicial foreclosure. After completing the required steps, the lender can sell the property to the highest bidder. This is a popular foreclosure option because it’s often cheaper and less time-consuming than litigating a case in court.
Nonjudicial Foreclosure on Commercial Real Estate
Lenders must follow every required step to pursue a foreclosure sale when a commercial real estate owner defaults on the loan.
The servicers must send the borrower a notice at least 45 days before initiating a foreclosure proceeding. The notice must include the following:
- Past due amount
- Fees and other charges required for the debtor to become current on the loan
- Contact information for the lender, servicer, or agent authorized to assist the borrower with preventing foreclosure
The lender must also send the property owner a notice of default. The notice includes a detailed statement of the amounts owed with daily interest charges based on current contract rates. The notice must go out to the borrower within 30 days of the date of filing a notice of hearing.
Notice of Hearing
The foreclosure process officially begins when the lender files a notice of hearing with the court. The borrower must receive the notice by certified mail within the timeframe below based on the circumstances:
- Posted on the property – No less than twenty days before the hearing
- Served to the debtor personally – No less than ten days before the hearing
During the hearing, the court will consider various factors to determine whether the lender can foreclose on the property.
Notice of Sale
There must be a copy of the notice of sale posted publicly and sent to the borrower at least 20 days before the sale. Typically, the court posts the notice at the courthouse after the hearing. Additionally, published notice of sale must be in a newspaper in the county of the property once a week for at least two consecutive weeks.
Once the court approves the lender’s foreclosure on the property, a sale auction takes place. It’s open to the public for bidding. The lender can accept a bid up to the debtor’s total past due amount, including costs and fees. However, the bid they accept could be less if they choose.
How to Prevent Foreclosure on Business Property
If you face foreclosure on real estate as a business owner, you could file for bankruptcy to protect yourself. Different types of bankruptcies are available, depending on the circumstances. Each offers its own protections and allows specific actions to keep the business afloat while paying back or reducing the amount of money owed to the lender.
Filing for Chapter 7 bankruptcy allows borrowers to liquidate their assets. Typically, this option is for business owners deciding to terminate operations. Instead of creating a repayment plan, the debtor files for bankruptcy and liquidates assets to cover the money they owe.
As a commercial real estate owner, you can file for Chapter 7 to liquidate your business. Lenders won’t be able to take collections actions against you when your company shuts down. The court appoints a trustee to manage and sell your assets. You can use these assets to cover the mortgage payments you missed.
If you file for Chapter 11 bankruptcy, you could rewrite the mortgage or reorganize the debt you owe the lender.
Cramming down the mortgage pursuant to Bankruptcy Code allows you to reduce the principal balance of your mortgage to match the property value. If you owe more than the property is worth, you can pay back the value of the property instead of the actual amount of the debt.
A Chapter 11 filing also permits you to reorganize your debt by creating a repayment plan. Once approved, you can make the same monthly payment until the mortgage lender receives its money back. You could even end up with a mortgage payment much lower than before. This can give you the time to focus on your business without the significant debt you owe weighing you down.
Chapter 13 bankruptcy is typically only available to individuals. However, if you are a sole proprietor and use real estate for your operations, you might be eligible for this type of bankruptcy filing.
Since a sole proprietorship isn’t a separate legal entity, you are responsible for your business and individual debts. That means your property and income are available to pay off the debt you owe on your commercial mortgage. You can continue operating your business while using your assets to make payments based on the repayment plan you create.
If you face significant real estate debt you can’t afford to pay off, you need a skilled and trusted Raleigh bankruptcy attorney for commercial real estate foreclosures from Bradford Law Offices to help you prevent foreclosure. We have represented commercial clients since 1996. You can count on our legal team to fight for the future of your business.