It’s Business, And It’s Personal

Commercial foreclosure not a 1-size-fits-all process

On Behalf of | Jun 2, 2015 | Business Foreclosures |

Businesses are in a sense living organisms. Just like the people who start them, most tend to go through a life cycle of birth, growth and eventual closure. Sometimes conditions are such that a foreclosure is called for. When such action is required in North Carolina, there are specific laws that dictate how they must be handled.

Part of the rationale for the rules and regulations is the realization that the local community has an interest in the process. Controlling the ebb and flow of business starts and closures helps support a sustainable environment. Even if some businesses fail, the overall atmosphere hopefully remains attractive and promotes economic growth. That makes ensuring that the proper foreclosure steps are taken accurately and efficiently critical.

Just as there are no two people alike, no two business situations are alike. Because of that, there can be different methods of pursuing a foreclosure.

Generally speaking, foreclosure represents the right of some third party to initiate legal action to recover the outstanding balance of a loan if the borrower fails to meet his or her obligations. Two types are most widely used.

The one that’s required in many states is foreclosure by judicial sale. In this form, the court supervises the sale of the mortgaged property to pay off the mortgage and pay other lien holders if funds remain. Because it is a legal action, all involved parties have to be properly notified. A trial usually is held, after which a judicial decision is rendered.

A nonjudicial foreclosure is often referred to as a foreclosure by power of sale. In this scenario, the action doesn’t have to go through the court. The mortgage can initiate the sale and the proceeds are used to make good first on the mortgage. Other lien holders may then make a claim. Any remaining funds go back to the original borrower.

A foreclosure by power of sale is generally speedier because court involvement is limited. But it may not be available if it is specifically excluded under the mortgage contract terms. Because of the complexities that can be involved, an attorney should always be consulted.