What Is a Personal Guarantee?
A personal guarantee is an agreement that allows a lender to go after your personal assets if your company, relative, or friend defaults on a loan.
Why You Might Sign a Personal Guarantee
Most new companies don’t have much in the way of assets. To increase the odds of getting paid, a lender will require a personal guarantee before extending a property loan or another obligation.
How to Eliminate a Personal Guarantee With Bankruptcy
It’s relatively common for a business owner to file individual bankruptcy to get rid of a personal guarantee—and most personal guarantees will qualify for discharge. Also, keep in mind that filing on behalf of the business won’t get rid of your personal obligation to pay back the guaranteed loan
Liens Remain in Bankruptcy—Usually
Some personal guarantees include a security interest in your personal assets. In that case, the lender will typically have a lien on your property.
Personal Guarantees in Bankruptcy Chapters 7 and 13
Each bankruptcy case is different. It’s common to have a lot of moving parts and considerations, so it’s best to meet with a bankruptcy attorney.
Chapter 7 Bankruptcy
If you don’t have much in the way of income or property—primarily debt—Chapter 7 will likely be your best option. You can wipe out (discharge) qualifying debt, such as credit card debt and personal guarantees, in approximately four months. Chapter 7 also works well if you have a substantial income, and the majority of your debt is business debt.
Chapter 13 Bankruptcy
Many business people find this chapter helpful in several situations. You, as an individual, not the business, would be filing Chapter 13—companies can’t file. Unlike Chapter 7, you can keep all of your property, and in most cases, you’ll pay a smaller portion of your personal debt over time. Chapter 13 has a few other benefits that aren’t available in Chapter 7. If you’re like many business people, you might have fallen behind on a house or car payment while trying to keep the company afloat. You can catch up on these payments through the Chapter 13 repayment plan and keep the home, car, or other secured property. Also, you might be able to reduce the amount you’d have to pay on some collateral through a cramdown in Chapter 13 bankruptcy.
Speak With Our Bankruptcy Lawyers In Phoenix & Scottsdale
Canterbury Law Group should be your first choice for any bankruptcy evaluation. Our experienced professionals will work with you to obtain the best possible outcome. You can on the firm to represent you well so you can move on with your life. Call today for an initial consultation. We can assist with all types of bankruptcies including Business Bankruptcy, Chapter 7 Bankruptcy, Creditor Representation, Chapter 5 Claims, Chapter 13 Bankruptcy, Business Restructuring, Chapter 11 Bankruptcy, and more.
*This information is not intended to be legal advice. Please contact Canterbury Law Group today to learn more about your personal legal needs.