Personal Guarantee and Litigation Risk Assessment

What a Personal Guarantee Actually Does

A personal guarantee is a short written promise that changes everything about a business loan. The moment ink touches paper, the debt stops belonging only to your company and starts belonging to you. Your personal bank account, your home, your car, and even your future wages become fair game for the lender. Banks, equipment financiers, and trade suppliers hand out these forms the way coffee shops hand out loyalty cards. The document is rarely longer than three pages, yet it can follow you for a decade. The guarantee remains alive until the loan balance reaches zero, the lender signs a one-page release, or a judge throws the paper away. Hidden inside the fine print are three dangerous phrases: unconditional, joint and several, and waive all defenses. Translated into everyday language, those words mean the lender can march straight past your company and knock on your front door first.

Five Early Warnings That a Lawsuit Is Loading

Trouble announces itself quietly. The company misses its second payment in a row. The lender stops asking for monthly financial reports. Your spouse signed the same line without ever speaking to a separate lawyer. The guarantee you signed last year suddenly covers a brand-new credit line you never approved. The interest rate jumps two points with no new signature page. Any one of these events is a smoke alarm. Two or more mean the building is already on fire.

The Four-Minute Risk Test You Can Finish at Your Desk

Take a blank sheet of paper and number one to twenty. Next to each number write Yes or No while you think about the guarantee sitting in your file cabinet. Did you sign in your personal name instead of just President? Does the paper say it covers every future loan? Is the company more than thirty days behind? Is your house listed anywhere on the form? Did the lender raise the rate without asking? Keep going until you reach twenty. Every Yes is one point. Four or fewer points and you can sleep tonight. Five to eight points and you need a lawyer before the weekend. Nine or more points and you need a lawyer before lunch tomorrow.

The Seven-Piece Folder That Wins in Court

Open your scanner and make a new folder on your desktop called Guarantee Proof. Drop in the original signed guarantee, every page. Add the promissory note or lease agreement. Slide in the personal financial statement you gave the bank. Save every email about rate changes or late fees. Include three months of company bank statements. Attach the corporate resolution that authorized the loan. Finish with any letter that contains the word release. Ten minutes of scanning today can save fifty thousand dollars in court tomorrow.

The Exact Phone Call That Starts Your Defense

Dial a business lawyer and use this script word for word. I signed a personal guarantee. The company is forty-five days late. I have the seven-piece folder and my twenty-question score. I need thirty minutes to find out if I have a defense. The lawyer will open three possible doors. Door one is the lender broke its own loan covenant. Door two is you signed under pressure or trickery. Door three is the debt was paid or released years ago. Thirty minutes on the phone usually costs less than one court filing fee.

Six Moves You Can Finish Before the Process Server Knocks .

Stop signing anything new until the lawyer reads it. Move personal cash to an account the lender has never seen. Pay yourself a normal salary this week and print the pay stub. Type a one-page letter to the lender listing every mistake they made and send it certified mail. Ask for a ten-day payoff quote in writing. Offer a short written payment plan and keep the postal receipt. Each piece of paper you create today becomes a shield tomorrow.

The Day the Judge Signs the Judgment

Lose in court and the lender receives a legal hunting license. Your personal checking account can be drained overnight. Twenty-five percent of every paycheck disappears before you see it. Liens land on your house, your rental properties, and your cars. The judgment earns interest and lives for ten to twenty years. A one-hundred-thousand-dollar guarantee can triple while you watch.

Your Twenty-Four-Hour Safety Plan

Tonight before bed, finish the twenty-question test and build the seven-piece folder. Save this article to your phone so you can open it in the courthouse parking lot if you need to. Tomorrow morning call one lawyer for the thirty-minute review and mail the mistake letter to the lender by certified mail. Five simple jobs move you from panic to power. You are no longer waiting for the phone to ring. You are the one making the calls.