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Personal Guarantees

Originally Published: March 2012

How Helpful Are They?

by Murray S. Lubitz, Esq.

It is a prudent credit manager that attempts to obtain personal guarantees from the principals of an incorporated entity to which credit is being extended. In today’s volatile marketplace, the existence of a personal guarantee may provide the only viable basis for collecting outstanding receivables from a corporate obligor experiencing financial difficulty. However, in the final analysis, the effectiveness of a personal guarantee is directly dependent upon the financial capability of the guarantor.