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Personal Guarantees in a Chapter 11 Bankruptcy

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  • 09-07-2016, 08:10 AM
    lawfacts
    Personal Guarantees in a Chapter 11 Bankruptcy
    My husband had a number of commercial loans that he needed to refinance. The bank he used was merging with another bank, and they suggested that he wait until the merger was complete to refinance. They told him to suspend payments until that happened. After the merger they told him that they would not refinance unless he provided additional security for the loans. They also wanted him to sign a release of any claims against them. He told them "no", and they called in his loans, so he filed Chapter 11 bankruptcy.

    Now the bank wants to go after our personal assets based upon his personal guarantees of the loans. He's being sued. He needs a bond for his business, and if he declares personal bankruptcy he's going to either be unable to get bonded or the cost of his bond will become unaffordable. Can the bank really sue him?
  • 09-28-2016, 02:03 PM
    Mr. Knowitall
    Re: Personal Guarantees in a Chapter 11 Bankruptcy
    The Chapter 11 is a business bankruptcy, and it relates to his business debts, but it does not discharge his personal guarantees. The bank can sue him over the guarantees. He should run his contracts past a lawyer to see if there is any way he can avoid honoring his guarantees but, as he's dealing with banks, that seems unlikely. If the guarantees are binding and (for practical, as opposed to legal reasons) he can't declare bankruptcy, he's going to have to work out something else -- and we don't know what he can afford to offer to the banks, or what they would be willing to accept.

    Chapter 11 is complex, so it's reasonable to assume that he has a lawyer working on that bankruptcy case. Perhaps the business bankruptcy lawyer can give him some quick advice.
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