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Barrister
Barrister, Lawyer
Category: Real Estate Law
Satisfied Customers: 33802
Experience:  15 years real estate, Realtor. Landlord 26 years
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A business has outstanding loans of $500,000.00 to a local

Customer Question

A business has outstanding loans of $500,000.00 to a local bank. The collatoral is the business and its 10 acres of land. (valued at over one million dollars). The bank calls in the loan, which cannot be paid. When the bank takes over all of the property does it owe anything back to the business owners? This is in the state of Wisconsin.
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Barrister replied 1 year ago.
Hello and welcome! My name is ***** ***** I will try my level best to help with your situation or get you to someone who can.
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Is this a situation where there the loans went into default and the bank then foreclosed on the property?
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Did the bank actually sell the property yet?
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Was there anything in the loan agreement that gave the lender the right to retain the collateral in satisfaction of the debt?
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thanks
Barrister
Customer: replied 1 year ago.
No, the bank did not sell the property yet. My understanding is that the city wants the land to build a road - so there may a deal in the works. I do not have specifics about the type of loans taken out. I am trying to help my sister. Her husband and brother-in-law owned the business but she was not invovled. unfortunately many bills are coming due and she must pay them to protect her own credit rating.
Expert:  Barrister replied 1 year ago.
Ok, as a general rule, if collateral is put up for a loan, if the loan goes bad, the bank has to foreclose on the collateral and then sell it at auction to apply the proceeds to the debt. If the property sells for more than the debt, then the debtor is entitled to the surplus proceeds back.
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But it all depends on how the loan was structured because the lender and debtor could have agreed that if the loan went bad, the lender could retake possession of the collateral and keep it in satisfaction of the debt and not have to actually sell it.
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In a vehicle repo case, the creditor has these options....sell the car and then sue the borrower for any deficiency or keep the car in satisfaction of the debt.
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So if they did their deal like a vehicle finance contract, then it is possible that the bank just got to keep the property upon default.
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But to know for sure, the contract would have to be examined to see exactly what the parties agreed to.
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thanks
Barrister

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