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  1. #1
    Join Date
    Sep 2016
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    13,916

    Default Liability of a Personal Guarantor of a Business Loan

    Two people in Florida started a business. One partner's mother was willing to offer a $100,000 loan to support the business, provided that both partners guaranteed the entire loan. They both signed separate, personal guaranty agreements.

    A year later the business is not working out as intended, and one of the partners wants to leave the business. He is willing to pay $50,000 to pay off his share of the loan, but is worried that the other partner will choose not to pay -- the loan was provided by the other partner's mother. He is concerned that the mother might come after him for the full $100,000 rather than trying to make her son pay back any portion of the loan. Would that be possible?

  2. #2
    Join Date
    Sep 2005
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    Behind a Desk
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    98,846

    Default Re: Liability of a Personal Guarantor of a Business Loan

    Yes, either guarantor could be held liable for the full value of the loan. The guarantor who paid more than his share would then have a right to seek contribution from the other partner.

    The man should try to negotiate an exit agreement with his partner and his partner's mother. It may be that the mother would prefer to have a $50,000 cash payment, as opposed to being told that if she rejects the offer she'll have to sue to recover any money (with her either suing her own son, or his being brought into the lawsuit for indemnification purposes). I would start by playing nice -- no threats, implied or otherwise, just the offer to pay $50,000 for the business to belong entirely to the lender's son and for the lender to agree in writing that the exiting partner is released from further obligation.

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