Personal Guarantors

Personal Guarantors

Under Florida asset protection law, who are considered personal guarantors?

In the realm of Florida asset protection law, personal guarantors are individuals who commit to being responsible for the debts or obligations of another party, typically a borrower or a business entity. This responsibility arises when the primary debtor defaults or fails to fulfill their financial obligations.

Asset protection for personal guarantors is crucial, as they can be held personally liable for the debts they guarantee. Florida law offers several strategies and tools to protect personal guarantors’ assets from creditors seeking to collect on guaranteed debts.

One example of a personal guarantor is a business owner who signs a personal guarantee to secure a loan for their company. In this scenario, the business owner becomes responsible for repaying the loan if the company defaults. Another example is a parent who co-signs a student loan for their child. The parent, in this case, would be considered a personal guarantor, agreeing to repay the loan if the child cannot make the required payments.

To minimize the risk associated with personal guarantees, guarantors should carefully evaluate their options and consider implementing asset protection strategies under Florida law. These may include creating appropriate legal structures, utilizing homestead exemptions, and establishing specific types of trusts. In addition, consulting with an experienced Florida asset protection attorney is essential to create a customized plan that effectively protects the personal guarantor’s assets from potential creditors.

Need help with a matter relating to personal guarantors? Schedule your consultation today with a top asset protection attorney.

Which asset protection laws relate to personal guarantors in Florida?

Several Florida and federal laws guide personal guarantors in asset protection matters.

In Florida, Chapter 673 of the Florida Statutes governs negotiable instruments, including guarantees, while the Florida Uniform Commercial Code (UCC) addresses guarantees and the enforcement of guarantees in various contexts.

At the federal level, the Fair Debt Collection Practices Act (FDCPA) protects personal guarantors from unfair or abusive debt collection practices. Additionally, the Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against credit applicants, including personal guarantors, based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

What are common issues regarding personal guarantors that lead to asset protection litigation?

The following issues are among the most common in actions regarding personal guarantors in asset protection law matters

• Ambiguity in guarantee documents: Disputes can arise when the terms of a personal guarantee are unclear or open to interpretation, leading to disagreements between the guarantor and the creditor.
• Discharge of the underlying debt: If the primary debtor settles or discharges the debt, the personal guarantor may argue that their obligation to the debt is also released, leading to litigation.
• Breach of contract by the creditor: Guarantors may claim that the creditor’s actions, such as modifying loan terms or failing to apply payments properly, constitute a breach of contract and thus nullify the guarantee.
• Fraud or misrepresentation: Personal guarantors may allege that they were misled or coerced into signing the guarantee or that the creditor misrepresented material facts, leading to a legal challenge to enforcing the guarantee.
• Statute of limitations: Litigation can arise when the creditor attempts to enforce a guarantee after the statute of limitations has expired, leading to disputes over the claim’s validity.
• Violation of consumer protection laws: Personal guarantors may assert that creditors have violated consumer protection laws, such as the FDCPA or ECOA, during the collection process, leading to legal disputes over the enforceability of the guarantee.

When a set of facts meets the requirements of asset protection litigation, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

Frequently Asked Questions

1. Can personal guarantors limit their liability in a guarantee agreement?
   Yes, personal guarantors can negotiate a limited guarantee that specifies a maximum amount they are liable for. A limited guarantee can help manage potential financial risks. However, the final terms will depend on the agreement between the guarantor, the primary debtor, and the creditor.
2. How can a personal guarantor be released from their guarantee obligations?
   A mutual agreement with the creditor or fulfilling specific conditions outlined in the guarantee agreement may release a personal guarantor from their obligations. In some cases, the release can occur if the primary debtor refinances the debt or the guarantor provides a substitute guarantor acceptable to the creditor.
3. Can a creditor pursue a personal guarantor before pursuing the primary debtor?
   In most cases, a creditor must first attempt to collect the debt from the primary debtor before pursuing the personal guarantor. However, depending on the terms of the guarantee agreement, the creditor might have the right to pursue the guarantor directly if the primary debtor defaults on the loan.
4. Are there any defenses available to personal guarantors facing legal action?
   Personal guarantors can raise various defenses in legal actions, including ambiguity in the guarantee document, discharge of the underlying debt, breach of contract by the creditor, fraud or misrepresentation, statute of limitations, or violation of consumer protection laws such as the FDCPA or ECOA.
5. What happens if a personal guarantor files for bankruptcy?
   Suppose a personal guarantor files for bankruptcy; their obligation under the guarantee may be discharged or restructured, depending on the type of bankruptcy filed and the case’s specific circumstances. However, the primary debtor remains responsible for repaying the debt, and the creditor can still pursue the primary debtor for the outstanding balance.

Have more questions about an asset protection-related situation?

Crucially, this overview of personal guarantors does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.