How can I protect my assets in the event that a personal guarantee for a loan is enforced?

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How can I protect my assets in the event that a personal guarantee for a loan is enforced?

I’m a partner in a business with a loan for 200K and a termed out line for 60K. My wife and I signed a personal guarantee and used the deed on our house as well. If the business goes under can I protect my house by filing for a homestead and file bankruptcy on the debt? I own 40% and have a partner that owns 60%.

Asked on February 20, 2014 under Bankruptcy Law, California

Answers:

Anne Brady / Law Office of Anne Brady

Answered 7 years ago | Contributor

If you used the deed on the house to guarantee the business loan, you can not claim the homestead exemption to keep your house.  That is because the business loan is not a purchase money mortgage (not a mortgage taken out to purchase your home).  If you also declare bankruptcy, the business lender will be first in line because the debt is secured.  Consult a bankruptcy attorney - you may not even qualify.


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