For companies that finance office, retail or factory space, falling behind on loan payments could lead them into foreclosure. While the foreclosure process for businesses is very similar to homeowners who default on a mortgage, the associated risks posed to a business are far different. Given this, consulting with a West Palm Beach foreclosure defense attorney who is experienced in business litigation is essential from the moment foreclosure becomes a possibility.
Here are some aspects of the process all business owners struggling with debt should know about.
About the Process
When a lender seeks to take over ownership of a company’s property as a means of fulfilling an owed debt, it is called a commercial foreclosure. Like all foreclosures in the state of Florida, the bank must go through the courts to pursue this matter. First, the bank will file a complaint, which the business will then be served, and in turn will have 20 days to respond. It is at this point the company will need to elicit an appropriate defense with the help of an attorney, should one exist. An attorney can also negotiate on the business’s behalf to seek out an alternative option, such as a loan modification or repayment plan that may allow the company to maintain its physical location. If a defense is not viable or proves to be unsuccessful, the property will be sold to satisfy the debt, just as with residential properties that have been foreclosed upon.
The key difference between a residential and commercial foreclosure in Florida lies in the appointment of a receiver. In the event that the owner of the business is not reporting all profits earned or has otherwise limited the company’s value, the lender can request that the court name a receiver to take over. This individual would be responsible for overseeing the property and even managing profits until it is sold, stripping that responsibility from the business owner.
How to Protect Assets
When a company falls behind on payments of any kind, swift action is needed to ensure assets are not put at risk. One option to consider is bankruptcy, which may offer the opportunity to discharge some of those debts. Most companies in this situation opt to file Chapter 7 or Chapter 11 bankruptcy. Chapter 7 is an option best suited for business owners that are interested in closing the business, as it involves liquidating assets to satisfy debts. For those who wish to protect those assets and continue operating their business, Chapter 11 is a better alternative. This would require the business to restructure its debt obligations. Ultimately, determining whether bankruptcy is a solution worth exploring will require the guidance of a knowledgeable bankruptcy attorney, like those at Kelley & Fulton.
If your business is falling behind on mortgage payments, a West Palm Beach foreclosure defense attorney can guide you through the process of finding an appropriate solution. To learn more about your options, schedule a free consultation with one of our attorneys today.