If I hold an unconditional guaranty from a personal borrower who has not paid, what steps must I take to initiate collection?
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If I hold an unconditional guaranty from a personal borrower who has not paid, what steps must I take to initiate collection?
Borrower (husband and wife) executed a guaranty as part of a personal loan ($70,000) to them, secured by their investment, a real estate LLC. The borrower has not paid the debt and the value of the security LLC asset has declined and not wanted by lender. Borrower is in financial difficulty and has no assets, other than a pending receipt of $170,000 proceeds from the sale of a different real estate LLC asset. I wish to enforce the guaranty and seek collection from borrower’s future receipts from the other LLC. How do I proceed?
Asked on December 28, 2011 under Bankruptcy Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
The guaranty is a contract; you may sue on it to enforce it. You would file a lawsuit in county court, to enforce the guaranty and seek payment under it. If the borrowers have no assets and little or no income, however, as a practical matter, you may not be able to recover anything, though future receipts may give you a mechanism to do so. You could seek injunctive relief under an order to show cause at the same time as you file the lawsuit, seeking a court order requiring the borrowers to deposit $70k of their receipts into a court account, pending resolution of the lawsuit. If you win the suit, you would then have the money released to you.
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