16 Mar So You Signed a Personal Guaranty?
So, you signed a Personal Guaranty when things were going well. Now you are experiencing…
The Snowball Effect
Once projects and businesses start experiencing serious cash flow problems, or the value of a development drops below the outstanding debt, investors and operators obviously want to walk away. They can’t afford to be tied to a losing project or development that has become a liability.
Ahhh, but you signed a personal guaranty. This is not a company obligation that you can just walk away from and stick your head in the sand. You are personally liable.
Personal Guaranty means Personal Assets
That means, depending on the state you live in, that your creditors could try and take your assets. Your house, your car, your retirement, and your cash in the bank. When there is a personal guaranty in place, the lender has the right to pursue the personal assets of the guarantor in an event of default on the underlying obligation.
Personal assets are on the line—homes, rental properties, investment accounts, jewelry (don’t ever wear jewelry to a debtor exam, or drive up in your Bentley), cars, art collections, firearms, and anything else a creditor can get their hand on. This is when sh@! gets real.
Now more than ever creditors are becoming more aggressive
They are more sophisticated in asset investigation, more cunning in debt collection, and more persevering in the enforcement of personal guarantees.
Good News – There is a Safe Harbor
Notwithstanding the pitfalls of a signing a personal guaranty, there are safe harbors where you can shelter in and hunker down with safety out of the storm’s reach.
When the law provides for protection from creditors, and statutorily mandates a “safe harbor” where your cash is safe, then it is safe. So long as the owner structured the safe harbor before the liability knocked on his or her door.
So, don’t come running to the safe harbor after you get sued; it will be too late. Plan for a hurricane before it is ever even forecasted, and you will always sleep well. (Not to say we haven’t protected guarantor’s assets when they came to us after they were sued. We have, but it is much more expensive, much more speculative.) Why wait when such a situation can be easily avoided with some simple planning ahead?
A Foundation of Asset Protection
The foundation of Asset Protection requires structuring before you ever have a problem requiring that you protect your assets. You must plan before the storm to have the strongest and most effective legal protection. When you build your house upon the rock, it will not be blown down. No matter how hard the big bad wolf blows.
Let us show you how easy it is to limit your risk and enter the safe harbor of protection.