PERSONAL GUARANTEES: A POSSIBLE NIGHTMARE FOR BUSINESS OWNERS
Delancey Street offers a money-back guarantee for debt relief services.
We are DelanceyStreet.com, a top tier business debt relief company, and we can help you if you’re feeling overwhelmed by personal guarantees.
WHAT IS A PERSONAL GUARANTEE?
A personal guarantee is a promise you make as an individual, rather than as a corporation or LLC, stating you’ll pay back a debt if your business cannot. In other words, it’s a lifeline for the creditor — and a possible toxic responsibility for you.
WHY DOES THIS MATTER?
If your business defaults on its debt, your personal assets (like your home or personal savings) could be at risk. And that’s not all. Some MCA lenders (merchant cash advance lenders), business credit card issuers, and SBA loan agreements often include personal guarantees. They do it so they have an extra layer of confidence that they’ll get paid.
AS SEEN WITH MCA LOANS
A merchant cash advance could stack up quickly, and if you signed a personal guarantee, it’s even more serious. Under the Uniform Commercial Code (UCC) and various state laws, creditors may enforce personal guarantees forcefully.
To learn more about how the government defines and controls business and personal responsibilities, check out the SBA at
https://www.sba.gov
PENALTIES AND LAWS
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Lawsuits
If you stop paying, the creditor can sue you individually. Your personal property may be seized or liens could be placed on your assets. -
COJ (Confession of Judgment)
Some lenders sneak a COJ in the contract. If you signed one personally, it means the creditor can file a judgment against you without a lengthy court process. -
Civil Penalties
In certain cases, state laws impose additional penalties if the creditor can prove fraud or intentional wrongdoing. Check out your state’s attorney general resources or visit
https://www.consumerfinance.gov for more info.
EFFECTS IN EVERY SITUATION
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LLC or Corporation
People often assume their corporation protects them. But a personal guarantee can pierce that corporate veil, leaving you personally responsible. -
Sole Proprietorship
If you’re a sole proprietor, the business is you—so you’re on the hook no matter what. With a signed guarantee, it’s doubly confirmed. -
Multiple Business Owners
If you have partners, each individual who signed the guarantee could be responsible for the full debt. Creditors don’t have to split it equally. They can chase one person for everything.
DEFENSE STRATEGIES
We are Delancey Street, and we focus on all types of business debt issues. Below are some ways we can help defend you against personal guarantees:
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Negotiation and Settlement
Business debt settlement is a lifeline for many. We can negotiate to reduce principle amounts or to stretch out your payment schedule. Sometimes, creditors just want something rather than nothing. -
Technical Contract Defenses
Sometimes, the contract has errors or the lender used unfair or predatory practices. Under state law, these can cancel parts of the agreement. -
COJ Breaking Down
A confession of judgment can be fought by challenging the validity of the document or how it was filed. We fend off potential lawsuits by asserting your rights under local rules. -
Early Communication
Regardless of whether you’re dealing with a major MCA lender or a small vendor, open communication can cut down on confusion and buy time.
HOW IT COULD GET TAKEN APART
Stream of consciousness style: Sometimes a personal guarantee collapses because the lender didn’t follow proper process. Maybe you never signed it knowingly, or they forgot a very important detail. Maybe their math is off, and the amount owed is incorrect. We’ve seen lenders attempt to enforce a guarantee based on incomplete paperwork, or they tried to slip a clause into your agreement that you never agreed to. The bottom line: if one link in the chain is broken, the entire guarantee might be not valid.
STRATEGIES OF HOW WE’D DEFEND YOU
- An Advantage: If you can make a lump sum offer, we might convince the creditor to settle for less.
- Legal Review: Our sister-law firm conducts a deep dive into your documents, looking for hidden flaws or dishonest terms.
- Rearrange: Sometimes, consolidating your debts (like a merchant cash advance consolidation) into a single payment can give you the financial breathing room to fight or negotiate a personal guarantee.
- Minimal Damage: If all else fails, we can help reduce harm to your personal credit score, or keep collectors off your back while you rework the debt into something manageable.
WHAT YOU SHOULD REMEMBER
We are owned by an attorney and bring a two-part approach to every debt case. Our results speak for themselves:
- Over 80% of our clients enter into a monthly payment plan.
- Over 80% of our clients get an additional 1-3 years added to their repayment term.
- Over 80% get a reduction in their overall debt.
ANYWAY, DON’T DELAY
If you think your personal guarantee is about to come back and bite you, reach out. Check your contract. Then come to us—DelanceyStreet.com—and we can help you.