Many small family businesses struggle when the economy hits a slump—and that can easily lead to problems meeting the commercial mortgage. When that mortgage is personally secured by the business owner’s guarantee, there is a real fear that everything he or she owns could be lost. An attorney who specializes in foreclosure defense services may be able to help. This is what you should know about possible defenses.

Are you sure that you made a personal guarantee for the business loan?

One reason to take your loan papers to an attorney and discuss your case is to find out if you really are personally liable for the business mortgage. You and the bank may both assume that you are, but the nature of your signature on the purchase agreement may not indicate personal liability.

For example, if you signed with your business title and your name, that may indicate that you were acting on behalf of the business, not as an individual. It may also indicate that you were confused at the time about your personal liability for the loan and that the bank may have been somewhat deceptive or unclear in explaining the possibilities to you if your business defaulted.

Was your guarantee only to a specific lender?

Mortgage loans change hands quite frequently and the language in your original mortgage may limit your guarantee only to the original lender—not any subsequent buyers of the loan. It’s possible that your guarantee expired when the loan was sold, but a careful reading of both the guarantee and the foreclosure complaint is necessary in order to make that determination.

Did you revoke your personal guarantee at some point?

If the mortgage was refinanced in the past, did you continue your personal guarantee or did you revoke it? Often, banks may start out requiring a fledgling business to provide a personal guarantee on a note until they’ve become more established. If your business eventually refinanced its mortgage, your personal guarantee doesn’t necessarily automatically carry over from the original mortgage—particularly if you notified the bank that you were no longer going to personally back the loan.

For more information or to discuss possible defenses on your commercial mortgage foreclosure, contact an attorney familiar with these types of claims right away.

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