Borrowing money from a bank is more difficult now than ever before. Moreover, presuming that the bank, or any other lender, is willing to advance funds to you, or in this case, your business, the lender will usually require a personal guaranty.
The personal guaranty itself must be in writing and is often contained within a specific document in addition to the note. As a personal guarantor, you will be, in most cases, liable for the debt in the event of default - and the bank does not need to seek redress from the principal obligor. That is to say that the bank can sue you, the guarantor, directly. Whether you as othe obligor have a cause of action against the principal borrower must be analyzed separately. Each situation, however, must be examined within the context of the applicable and very specific statute of limitations.
Recently, the Illinois Appellate Court addressed itself to the liability of an individual guarantor on a series of notes wherein the principal debtor, or obligor, was an Illinois corporation. The trial court directed a verdict, taking the case from the jury, in favor of the guarantor and held that she was not liable for the corporate debt even though she was one of the individual guarantors. Sorman & Frankel represented the guarantor and the case was affirmed on appeal. The case, Riley v Drexler, can be found at http://www.state.il.us/court/opinions/AppellateCourt/2011/1stDistrict/March/1100880.pdf.
The underlying case, and opinions from both the trial and appellate courts, are fact specific but provide an interesting analysis of the law as it has been applied to the facts in this case. If this is of interest to you, or might otherwise reflect any one or more of your individual concerns, please contact us for further information and guidance.