The LLC failed but the guarantee you signed follows you home. Guaranteed business debt settles like consumer debt — with a few twists that can work in your favor.
What the Law Says
A personal guarantee is a contract claim against you individually, subject to the four-year limitations period and ordinary proof requirements — the signed guarantee itself, the underlying debt, and the default. Rosenthal consumer protections may not apply to commercial debt, but documentation burdens and settlement economics fully do.
How to Handle It, Step by Step
- Collect the loan file: guarantee, credit agreement, security interests, and any SBA involvement.
- Verify the guarantee’s scope — some are limited, capped, or terminated by earlier events.
- For SBA loans, engage the offer in compromise process built exactly for failed-business guarantors.
- Negotiate against collectability: your personal balance sheet and exemptions frame the realistic number.
- Settle with complete releases covering the guarantee, the entity debt, and every affiliate claimant.
Common Questions
The lender never asked the dissolved LLC for payment. Can they come straight to me?
Usually yes — guarantees typically waive the requirement to exhaust the borrower first, which is precisely what the bank paid for.
What do SBA offers in compromise actually accept?
Documented-hardship lump sums well below face value are routine — the program exists because pursuing broke guarantors forever costs more than resolving them.
Get the free California Debt Settlement Kit — validation and cease letters, negotiation scripts, settlement calculators, lawsuit response guides, and AI prompts to customize every document to your facts. Free, no email wall, at debtsettlementkit.com. All five Justice Foundation kits are at justiceprompt.com. Educational use only — not legal advice.
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