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jaden3292002 · Joined: 30 Jun 2008 Posts: 12 7.52 Dollars($)

My husband and I bought a business 2 years ago when I was 24. It was a small country store in rural Vt.
Over the course of 2 years we fought hard to build it up, but it just kept sinking and finally we made the decision to close it this June. The mortgages on the building haven't been paid in almost 3 months and the bank is definately threatening foreclosure. We want to try to come out as clean as possible we already owe some companies alot of money and are trying to work out payment plans. We are sole proprietors so we are personally responsible for the failure of the business and the repercussions from that.
Meanwhile we haven't gotten any official foreclosure notice yet the bank has been sent in to take pictures of the building and has had a environmental company come in and make sure thier are no hazards, all in the event that they will be foreclosing. Does anyone have any advice on the best way to deal with this to come out as clean as possible. I think our state is a deficiency judgement state, and our banker has mentioned that the bank would want to get rid of the property before winter to avoid heating costs, so I suspect they would just auction it off and stick us with a bill. Are thier other ways to handle this? Can we ask for a deed in leui of and will that release us from this?
Thanks for any advice that comes my way.
Jacqui

jheard · Posted: Mon Jun 30, 2008 1:44 pm Post subject:

I would check with a bankruptcy attorney to see about an "Assignment for the Benefit of Creditors", which is like a bankruptcy, but does not go on your credit. You can lump the real property in with the other business assets.

Guest

Now that we actaully got the 'summons' which says that we are being sued, the bank itself suggested a 'short redemption period'. We asked about a deed in luie of foreclosure with a harmless clause and the banker said that they wouldn't consider that.... yet.
What would make them consider that?

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi Jacqui.

The lender or the mortgage companies consider deed in lieu if they find it less expensive than foreclosure and the borrower cannot sell the property. So have you tried short sale? It will hurt your credit comparative less than foreclosure.

Feel free to ask if you have any further questions.

Best of luck,
Larry

Guest

Thank you Larry, the bank is not seeming very willing to work with us, but we do have a buyer interested and the bank said if we can get them to sign a purchase agreement they will stop the foreclosure process. Of course the trick is to not tell the interested people that it is close to a foreclosure but at the same time trying to get it to move a little faster.
If the people are not interested the bank said that they would be willing to do a short redemption period. I think the bank knows that they can get what they need out of selling the property so they are not even going to work with us. Thier is also another mortgage on the property through a investment company that we got our start up funds through, and our bank said that they aren't even considered in this, basically the bank isn't going to try to get enough out of it to pay both mortgages off and we will be stuck with the other one (which is about 50 grand). I thought when starting this process that both mortgages would be considered.
Banks definately look out for themselves and I think if we are to willing to work with them they may not consider letting us try for a short sale or a deed in leui of.

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi Jacqui.

Welcome back.

If the mortgage is foreclosed then the first lien holder will be paid first. I think the investment company will be considered as the second lien holder. So if there is no excess money left after paying off the first lien holder through the foreclosure sale you will be responsible to pay off the second lien holders. In the short sale process also the first lien holder comes first.

See, the lender may not be willing to work out with you but you need to try again and again as it is your need. Generally the lenders also don’t want foreclosure as it is expensive. So send them a hardship letter and try to work out with them.

Hope this helps. Feel free to ask if you have further questions.

Best of luck,
Larry

Guest

Thanks Larry!
Is it normal on the foreclosure letter they gave us it says 'you are being sued' ? Is foreclosure a lawsuit?

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi Jacqui.

In the process of foreclosure the lender actually sue for not paying the debt. So your can say this is a kind of lawsuit. BTW have you sent a hardship letter? Is the lender willing to work out with you.

Please keep us posted and update us with your situation.

Best of luck,
Larry

Guest

What is a hardship letter? Would I send it to my bank?

Guest

Also I am sure this doesn't matter, but the bank that is foreclosing was also where are bank account was and durring the 2 years we were open they charged us 25,000 in over draft fee's for covering our checks when our cash flow was low. We asked for a line of credit for 10,000 and they would only give us a 5,000 line of credit which we knew and they did to wouldn't do much long term for our cash flow problems. I feel that they knew they were slowly sucking our business dry, I know that thier is nothing I can legally do about that, but at the same time if they had worked with us to strenghten our cash flow we would have avoided this whole situation and still have been in business.

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi Jacqui.

Welcome back.

Through a Hard letter you can inform the lender about your financial hardship for which you cannot make the payments and you need to also mention that what are the steps that you are taking so that you can get back on track. Know more about the hardship letter at http://www.mortgagefit.com/problems/hardship-letter.html#44255

Hope this helps. Feel free to ask if you have any further questions.

Best of luck.
Larry

Guest

Hi Larry,
I see what you mean, we are beyond that with this bank. They already new about our financial hardship from many conversations we had with the vice president. Also with lack of the stores income we wouldn't have the money to get back on track with them. Our only hope is to get enough time to sell it.

Niicss · Posted: Thu Jul 10, 2008 2:29 am Post subject:

Welcome Jacqui.

You are right. You should first try to sell the property and if you cannot sell the property to pay off the mortgage company then you should request them to accept the deed in lieu so that you can avoid foreclosure. By the way have you consulted with any real estate attorney?

Guest

I am meeting with the attorney tomorrow, and i think he is a pretty good one. We asked about a deed in luie with a harmless clause and the bank said that they aren't willing to do that ...yet.... so I wonder what the 'yet' is about. Also if we do a deed in Luie of that wouldn't help with the other lender we have for the 50 thousand,
see this is the things many people don't think about when buying a business, I know I didn't. I just thought that both lenders had liens on the building and that worse comes to worse people said to just give the keys back...
I guess its a lot more complicated than that !

larry · Joined: 27 Jun 2007 Posts: 3322 474.67 Dollars($)

Hi Jacqui.

That's true. In this financially crunched market things get more complicated as the value of the property gets down. If the property value were higher now then only giving the key back may do. But now you will still owe to the other lender. you are not alone in this situation. Thousands of people all over the US are in the same situation.

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