When it comes to guarantees, it is better to get them than to give them! A guaranty agreement obligates a party for the liability of another party. Arizona law requires that a guaranty agreement must be in writing. If you are a lender, it is always a good idea to obtain a guaranty agreement on substantial loans.
In a commercial transaction between legal entities with limited liability, individuals often sign guaranty agreements. The individuals are often the owners, members or managers of the entity. These individuals are typically reluctant to agree to be personally liable for the loan to the entity since it was created to shield them from liability, but the extension of credit to a corporate entity without any personal guarantees accompanying it could be a suspect transaction.
Arizona is a community property state. If your individual guarantor is married, both spouses must sign the guaranty in order to bind the marital community property.
Before you extend credit to a corporate entity, it is imperative that you investigate its creditworthiness and ability to repay the debt. If there is any indication that the corporation is not creditworthy, a personal guaranty by the principals, and their spouses, of the corporation should be required.
If you have any questions regarding personal guarantees or you need assistance drafting a guarantee document, please contact Windtberg & Zdancewicz, PLC today.
The attorneys at Windtberg & Zdancewicz, PLC, provide clients with experienced legal representation. We handle many types of business disputes on behalf of both creditors and debtors. Our attorneys handle cases from pre-litigation negotiations through litigation, obtaining and enforcing judgments to collect what our clients are owed. We are experienced in creditor’s rights including garnishments, charging orders, attachment, property execution, trustee’s sales, foreclosures, judgments, judgment collection, domestication of foreign judgments, and creditor’s issues in bankruptcy cases. If you need assistance, or are interested in learning more, please contact us at (480) 584-5660.