Question 1

Can I negotiate a personal guarantee out of a contract?

Accepted Answer

Sometimes. Landlords and lenders may waive the personal guarantee if your business has strong financials, significant assets, or a proven track record. You can also negotiate a limited guarantee (capped at a dollar amount), a declining guarantee (reduces over time as you prove reliability), or a 'good guy' guarantee (you're only liable if you don't vacate properly). Never just sign it — always push back.

Question 2

What's the difference between a personal guarantee and a co-sign?

Accepted Answer

A co-signer is equally liable from day one — the creditor can pursue them immediately. A guarantor is typically liable only after the primary party defaults and the creditor has attempted collection. However, many 'personal guarantees' are written as unconditional guarantees, which effectively make you a co-signer. Read the language carefully — the word 'unconditional' erases the distinction.

Question 3

Does a personal guarantee survive bankruptcy?

Accepted Answer

If the business files bankruptcy, the personal guarantee survives — that's the whole point. The creditor can pursue you personally even though the business is in bankruptcy. If you personally file bankruptcy, the guarantee may be dischargeable depending on the type of bankruptcy and the nature of the debt. Consult a bankruptcy attorney before assuming it goes away.

Question 4

Can a personal guarantee be limited in scope?

Accepted Answer

Yes, and you should always try to limit it. Common limitations include: a dollar cap (guarantee up to $50,000 instead of the full obligation), a time limit (guarantee covers only the first 2 years of a 5-year lease), or specific obligations only (guarantee covers rent but not build-out costs or legal fees). Any limitation reduces your personal exposure.

Question 5

What assets are at risk with a personal guarantee?

Accepted Answer

In theory, all personal assets: bank accounts, real estate, vehicles, investments, and other property. In practice, your state's exemption laws protect some assets — many states exempt a primary residence (homestead exemption), retirement accounts, and basic personal property. But these protections vary widely by state, and they don't eliminate the risk — they just limit it.

Question 6

Should my spouse sign a personal guarantee?

Accepted Answer

Avoid it if possible. Some creditors request both spouses' signatures to reach marital assets. In community property states, a single spouse's guarantee may already expose community assets, but having both sign removes any ambiguity. If the creditor insists on a spousal guarantee, negotiate hard — or find a different landlord or lender.

Personal Guarantee

Definition

In Practice

Example Clause

Common in these contract types

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Frequently asked questions about personal guarantee

Create a contract with proper personal guarantee clauses