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Updated about 6 years ago on . Most recent reply

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Larry Bowers
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Personal guarantees; worth the paper they are printed on?

Larry Bowers
Posted

If I have a borrower sign a personal guarantee on a loan that is unsecured by property, let's say $300K, and he doesn't pay after a while, of course I can't foreclose. There is no security. But as for the personal guarantee, what exactly does this mean, and in this case, is there truly any recourse? Is the personal guarantee worth the paper it is printed on? 

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Kyle J.
  • Rental Property Investor
  • Northern, CA
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Kyle J.
  • Rental Property Investor
  • Northern, CA
Replied

Doing a $300k unsecured loan to a LLC would be quite risky. However, to your question, if one of the members was personally guaranteeing the loan, yes - that could be enforceable.

The question is though, what kind of financial position is that person in and do they have significant personal assets that you could go after to recover your money in the event they default. They need to be able to back up their guarantee. 

If the person making the personal guarantee has no money or assets, then the guarantee is pretty much worthless. 

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