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Just What Is Commercial Foreclosure Law?
from: John D. WallerThe cast of characters. Everyone knows what a bank is. Most of
us understand what a lender is - an institution from whom money
is borrowed. Adding the word "commercial" to describe a lender
simply means that the financial entity deals with businesses as
opposed to individuals. Black's Law Dictionary defines
"commercial loans" as: "loans made to businesses as
distinguished from personal-consumer credit loans." Although a
lender could make both commercial and consumer loans, this blog
is dedicated primarily to commercial matters.
The field of law. To me, commercial foreclosure law refers to
the rules and procedures applicable when a business defaults on
a loan secured by some kind of collateral. So, if you work for
an institution that loaned money to a business, and if the
borrower defaulted under the terms of the loan agreement, then
commercial foreclosure law provides the judicial framework for
the protection of your rights. Typically, those rights involve
the ability to collect money owed by the borrower through the
sale of the loan collateral. Collateral. Black's states that
collateral is property pledged as security for the satisfaction
of a debt. If a business defaults on a loan, the lender can
initiate a foreclosure action to compel the sale of the loan
collateral and therefore collect the amounts owed by the
borrower through proceeds from the sale. There are all kinds of
business-related collateral. Perhaps the most recognizable is
real estate - the land a business owns. Some of the most
interesting cases, however, deal with personal property
collateral, which can be any property imaginable that is owned
by a business - a fleet of cars, office furniture or intangibles
such as accounts receivable. Lien. A lien is a description of an
encumbrance on property: "a claim . . . on property for payment
of some debt." Black's. In the context of my blog, a lien arises
by written contract between a lender and a borrower - either a
real estate mortgage agreement or a personal property security
agreement. The lien granted by a borrower to a lender gives a
lender the right to foreclose upon the subject property
(collateral) for payment of the debt in the event of a default.
Commercial foreclosure. Turning again to Black's, a foreclosure
is defined, in part, as the "enforcement of a lien . . . or
mortgage . . .." Paraphrasing Black's, foreclosure is the legal
process by which real or personal property subject to a lien is
sold in satisfaction of a debt. To foreclose means to terminate
a borrower's rights in the subject property. A foreclosure that
is commercial merely refers to the termination of a business
borrower's rights in its property.
A form of collection. Commercial foreclosure law is a special
kind of collection law. It's a body of rules governing how banks
and financial institutions recover money by asserting rights in,
and selling, collateral that a business granted to secure the
loan. It's the set of legal principles applicable to a lender
needing to collect money owed by a business, which failed to
make its loan payments or otherwise defaulted under the terms of
the loan documents. If any of these matters are relevant to what
you do for a living, I welcome your visits to my blog and hope
that you will e-mail me with your questions or comments.
About the author:
John D. Waller is a partner at the Indianapolis law firm of
Wooden & McLaughlin LLP (www.woodmclaw.com). He publishes the
blog Indiana Commercial Foreclosure Law at
http://commercialforeclosureblog.typepad.com. John's phone
number is 317-639-6151, and his e-mail address is
jwaller@woodmclaw.com.
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