The Need for Personal Guarantees - Difficulties Collecting From Dissolved Businesses


Working with another person, vendor or company is, at its heart, a risky proposition. Most of the time, people do what they say they’re doing to do and get the job done. However, there are times where a business may fail to fulfill their promises.

In any industry – especially construction – you need to have a contract in place to make sure everyone is on the same page in terms of what you’ll do and when you’ll do it. Another way to ensure that the job gets done is to have a personal guarantee.

Think of a personal guarantee as a written promise between two or more people or businesses. The guarantor – that’s the business owner, business executive or related entity –agrees to pay a debt. If this person fails to pay, the lender can seek payment the personal assets of the business owner, who signed on to be the guarantor.

If their company fails to pay, goes under or cannot fulfill the personal guarantee for whatever reason, you then have grounds to sue the individual who made the personal guarantee. He or she is responsible for fulfilling the agreement, and that usually means they have to pay out of their personal accounts.

Think of it this way: Donald Trump’s businesses have filed for bankruptcy numerous times. However, he has not been sued because he did not have a personal guarantee on these businesses. So he has avoided personal bankruptcy on these deals.

In other words, you can seek repayment through a lawsuit of the individual who signed a personal guarantee. This is another level of security when working with an individual and his or her company – it makes them personally responsible for the debts they incur. It also protects you if they fail to pay on the debts they owe you.

And, if you’ve accepted an oral agreement as a personal guarantee, you’ll want to get it in writing as soon as possible. You’ll need to have this documented reviewed by an experienced lawyer to ensure it covers everything it should and gives you a method to collect if needed.

On the other hand, if you are the person who made a personal guarantee, the attorneys at The Lien Company can make some recommendations on what to do next if you find yourself unable to pay. We can come up with an action plan that will help you and your business.


Ensuring you have a construction lien on a property for unpaid work is typically is considered a better bet for getting paid if someone owes you or your company money. If you have any questions about personal guarantees, construction liens or anything else, please contact The Lien Company and let us help you get the money you deserve.