How to enforce a personal guarantee on a business debt

Updated 2026-10-24

To enforce a personal guarantee, first confirm the guarantee is signed by the individual in a personal capacity and covers the debt in question. Then send a written demand to the guarantor, following any notice terms in the document. If the guarantor does not pay, you can typically sue them, often in the same case as the business, and enforce the judgment against their non-exempt assets. Review the guarantee with an attorney before suit.

Why a personal guarantee matters

Owners of corporations and LLCs are generally not liable for company debts. A personal guarantee changes that: an individual, usually an owner, agrees to pay the business's debt if the business does not. When a customer closes, files bankruptcy or simply stops paying, the guarantee is often the difference between recovering the balance and writing it off.

But a guarantee is only as good as its wording and its signature. Before you rely on one, read it as if you were the guarantor's lawyer looking for a way out.

Step 1: Review the document

• Is it in writing and signed by the guarantor? Guarantees of another's debt generally must be in writing to be enforceable
• Did the person sign individually, not only as 'President' or 'Member'? A signature with only a corporate title can lead to a dispute over whether it binds the person
• Who is the guarantor exactly: full legal name and, ideally, home address
• Which debts does it cover? A continuing guarantee covers future purchases; a limited one may cover only a specific amount, order or time period
• Is it a guarantee of payment or of collection? Some guarantees require you to pursue the business first
• Does it waive notice, presentment and the right to require you to pursue the business or collateral first?
• Does it include attorney fees, collection costs, interest, a venue clause and a choice of law?
• Has the guarantor sent a written revocation? Revocation commonly stops future debts but not ones already incurred

Step 2: Check for problems that weaken it

Several situations can create defenses. If you materially changed the underlying deal without the guarantor's consent, such as extending large new credit beyond the guarantee's terms, some courts treat that as releasing the guarantor, unless the guarantee consents to such changes in advance. If the business entity changed, for example a new LLC replaced the old one, the guarantee may not cover debts of the new entity. If you released collateral, the guarantor may argue that impaired their position.

Spousal signatures and community property rules can matter when you try to reach jointly owned assets, and those rules vary by state. None of this means the guarantee is unenforceable. It means you should know your weak spots before the guarantor's attorney points them out.

Step 3: Send a demand to the guarantor

Send a written demand to the guarantor personally, at the address in the guarantee or their current home address, and follow any notice requirements in the document. State the amount owed by the business, attach the guarantee and statement of account, and set a payment deadline. Copy the business if it still exists.

Many guarantors pay at this point, or negotiate a payment plan, because their personal credit and assets are now at stake. A signed payment agreement with the guarantor should restate that the guarantee remains in force until the balance is paid.

Step 4: Sue if necessary

If the guarantor does not pay, suit is usually filed in a court where the guarantor can be sued, often their home state or the forum named in the guarantee. The business and the guarantor can commonly be named in the same case. If the business is in bankruptcy, the automatic stay generally protects only the business, so the claim against the guarantor may proceed separately, though you should confirm that with counsel.

Because the underlying obligation is a business debt, the federal Fair Debt Collection Practices Act generally does not apply to collecting it from a guarantor, since the act covers debts incurred primarily for personal, family or household purposes. State laws can differ, and conduct standards still apply.

Step 5: Collect the judgment

A judgment against an individual guarantor can typically be enforced through bank levies, wage garnishment where state law allows, liens on real estate and other remedies. Every state protects certain assets from creditors, such as a portion of home equity, retirement accounts and some personal property. The size of these exemptions varies a great deal, so a guarantor with substantial assets on paper may have less reachable than it appears.

If the guarantor files personal bankruptcy, collection stops and you file a claim in that case instead.

How we handle guaranteed accounts

When you place an account with a personal guarantee, send us the signed guarantee along with the credit application and invoices. We contact both the business and the guarantor on contingency, and we report early on whether the guarantor appears to have reachable assets. If suit is needed, we refer the claim to a local attorney with your approval. We are not a law firm, so questions about whether a specific guarantee is enforceable belong with the attorney.

Frequently asked questions