Bankruptcy & Personal Guarantees

If you lease office space to run your business, you likely are on the hook for your business's rent and other lease costs through a personal guarantee. The purpose of a guarantee is to give the landlord a legal means to go after you personally if your business entity defaults on the lease.

For example, if you run a sandwich shop using business entity Good Sandwich, LLC and Good Sandwich, LLC leases space from a landlord, chances are your lease required you to sign a guarantee so that the landlord isn't stuck trying to collect from your corporate entity if the lease is in default. Personal guarantees have been pretty standard in most business leases with landlords since the 2008 financial crisis.

Why does this matter and how can bankruptcy help? Well, if your business is in trouble and you break the lease, the landlord is likely to sue you personally on the guarantees. Guarantee lawsuits are expensive to defend and almost always result in a judgment or settlement in favor of the landlord that you will not be able to pay.

Your best recourse in that situation is likely a Chapter 7 personal bankruptcy, which allows you to discharge your personal liability on the guarantee (and to save money defending what would otherwise be an expensive lawsuit). If your business is in trouble and you cannot afford the rent, contact Steele Law Firm to discuss resolving your guarantee problem the easy way - with a Chapter 7 bankruptcy.

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