Remember The Meaning Of A Personal Guaranty

I continue to hear from borrowers in default who are confronting demand from the bank for payment and believing that some assets are excluded from the firestorm about to hit them.

For example, I hear,”Well, I own another business but that business didn’t sign a guaranty so it’s excluded.”

Even worse is when I hear “Well, the bank does not have a lien on my house or a mortgage so it’s OK.” Or even, “My wife didn’t sign so my house is safe.”

NO, NO, NO!!!

Let me be clear. Once you sign a personal guaranty, everything you own is collateral for the loan. Everything!

For example, through your ownership position of other corporations, LLC’s or partnership, the business is collateral for the defaulted note. Even though your wife may have not signed the guaranty, her ownership portion of the equity of the home may be exempt but the defaulting borrower’s position is collateral and a lien can be put on the house or it can even be liquidated. The personal guaranty covers everything you own.

Check with your attorney for specifics on this but this is the general understanding you must grasp.