Loan & Lease Default Protection
That Personal Guarantee You Signed Is About to Cost You Everything.
Over the past 25 years we have represented hundreds of clients facing exposure on a personal guarantee. Guarantees on business loans (including SBA and EIDL loans), on real estate development projects, and on lease obligations. We know how aggressive various lenders are likely to be and how far they will go to collect their obligation. More importantly, we know what to do to change the economics of the case for the lender to force them to the negotiating table. Let us help you negotiate a pay off that you can live with!
The Guarantee Just Became Very Real
When you signed that personal guarantee, it felt like a formality. The bank required it. The landlord required it. Everyone signs them. You signed because the business needed capital and because you never expected it to come to this.
Now the business is struggling, the loan or lease is in default (or will be soon), and every demand letter is addressed to you personally. That guarantee means your home, your savings, your investments are on the line.
We have represented hundreds of clients facing loan and lease defaults or worried about future defaults. Call us to learn how to protect your assets or read on.
Hundreds
Clients Represented
25 Years
Asset Protection Experience
~30%
Of Lenders Walk Away Entirely
What a Personal Guarantee Actually Means
A personal guarantee converts a business debt into a personal debt. In many cases, the creditor can come directly after your personal assets without first pursuing the company. Your home equity, bank accounts, brokerage accounts, rental properties, vehicles — everything is exposed.
We regularly see personal guarantees on commercial leases totaling hundreds of thousands of dollars, business loans in the millions, and SBA loans with guarantee requirements that borrowers signed without fully understanding the exposure. This is particularly true of the Covid-era EIDL loans in excess of $500,000.
How This Plays Out
1. Demand Letters
The lender sends formal demands addressed to you personally.
2. Lawsuit Filed
If the debt is not resolved, they file suit against you.
3. Summary Judgment
In many guarantee cases, the lender obtains summary judgment quickly because the terms are straightforward.
4. Collection Begins
Bank levies, property liens, wage garnishments, and asset discovery under oath.
Two Clients. Two Very Different Outcomes.
Without Protection
The Business Owner: A Guarantee He Wasn’t Prepared For
A business owner in Los Angeles signed a personal guarantee on a commercial lease. When the business failed, the landlord pursued over $400,000.
The client assumed his entity would protect him. It did not. By the time he came to us, options were limited.
We still protected a portion of his assets and negotiated the judgment down, but he would have been in a far better position had he acted at the first demand letter.
Outcome: Options were limited. A portion of assets were saved, but far less than proactive planning would have preserved.
With Protection
The Investor: $2M Guarantee, Protected Before Suit
A real estate investor facing a $2 million guarantee came to us when the loan first defaulted.
We restructured her holdings into asset protection trusts and LLCs before suit was filed.
The lender settled for a fraction of the face amount. Her legal fees were a small fraction of what she saved.
Outcome: The lender settled for a fraction of the original amount. Her assets were preserved.
We have represented hundreds of clients facing personal guarantee exposure.
Or call 818-933-3838
The Structures We Use
Asset protection is not a single product. It is a combination of legal structures tailored to your specific situation. We consider such factors as the timing of asset protection, how well our client wants to protect her assets, how aggressive and diligent the creditor is likely to be, and what are the specific assets that need to be protected. Here are the most commonly used structures for clients who are exposed to a personal guarantee:
Because your real estate is the first target a creditor will look at, removing accessible equity is often the first step. We do this by placing legitimate encumbrances on the property. This can be done through an actual loan from a third-party lender, which is virtually impossible for a creditor to challenge, or through a line of credit arrangement that reduces the visible equity. A creditor can only take the equity. If there is no accessible equity above existing encumbrances, a judgment lien is worthless as a practical matter.
Not all asset protection has to be complex or expensive. A properly structured Wyoming LLC provides strong charging order protection, which means a creditor’s only remedy is a lien on distributions from the LLC, not seizure of the assets inside it. Wyoming also offers something most states do not: anonymity. We can organize a Wyoming LLC without connecting your name to it on any public record. If you are the sole owner, it is a disregarded entity for tax purposes, which means no additional tax returns are required.
For clients with significant assets beyond real estate, an irrevocable trust established in a favorable state removes those assets from your personal ownership while preserving your ability to benefit from them. The trust protector, a person you select and trust, holds the power to amend the trust, change trustees, and even return assets to you. No income tax or gift tax consequences. No separate tax return required.
If you are married and only you signed the guarantee, we can change the character of your community property to separate property, shielding your spouse’s share from the creditor. In California, a creditor of one spouse can reach all the community property, not just 50%. We structure these as equal splits, which makes them difficult to challenge. The agreement is private and can be reversed at any time. No income tax consequences.
For clients with significant liquid assets, or clients willing to sell their assets and go liquid, nothing beats an offshore structure. Creditors very rarely pursue assets overseas, and even more rarely are they successful.
Timing
The best time to plan is prior to default. The next best window is between default and the filing of a lawsuit. If suit has been filed but no judgment entered, meaningful options remain. Even after judgment, strategies are available — but sooner is always better.
The goal of asset protection is to change the economics of collection so that the lender has an incentive to negotiate. That changes outcomes.
When to Act
The single most important factor in personal guarantee protection is when you act. The law draws a sharp line between planning that occurs before a creditor exists and transfers made after a debt is in default, which may be challenged as fraudulent conveyances.
A “creditor” in the legal sense exists earlier than most people think. If you have received a demand letter, if a loan is in default, or if a lease obligation is accelerating, that creditor relationship already exists.
Even after a lawsuit is filed, however, there are often options. The goal shifts from prevention to damage control — and our experience with hundreds of guarantee clients gives us a clear view of what remains legally available to you.
Common Mistakes
Ignoring the demand letter
Assuming the business entity protects you
Transferring your home to a spouse or child without proper legal structure
Negotiating with the lender without first protecting your assets — which hands them all the leverage
Learn More
How Equity Stripping Works
Remove accessible equity from your real estate so creditors have nothing to pursue.
How Wyoming LLCs Work
Strong charging order protection with full anonymity — no additional tax returns required.
How Domestic Asset Protection Trusts Work
Remove assets from personal ownership while preserving your ability to benefit from them.
How Transmutation Agreements Work
Convert community property into separate property to limit spousal liability exposure.
Take the First Step
Free, confidential consultation. We assess your personal guarantee exposure, review your assets, and outline what can realistically be done.
This is attorney advertising. The information provided is for general informational purposes only and does not constitute legal advice. Contacting Aliant LLP does not create an attorney-client relationship. Past results do not guarantee future outcomes. Every case is different and must be evaluated on its own facts.