In 2008, the housing crisis changed a lot about how mortgages and other loans are handed out. Credit and income requirements are much higher, and many borrowers need another person or entity to sign as a personal guarantor in order to receive a loan.
Establishing a personal guarantee on a loan means you’ll be required to repay that debt in the event the primary borrower cannot. If you’re left to pay a debt and find yourself in a situation where you also cannot repay it, filing for bankruptcy may be the best solution depending on the type of debt involved and your additional financial circumstances. With the help of Behm Law Group, Ltd. you can file a successful bankruptcy case and receive long-term debt relief in Fairmont, MN.
Bankruptcy is a highly effective legal process that treats many types of debt. While there are some debts, such as child support, alimony and some tax debts, that are typically not included in a bankruptcy discharge, the majority of common individual consumer or business debts will be discharged. Some of the most prevalent debts for a typical person are mortgages, car loans, and credit card debts. All of these can be discharged through bankruptcy, and this is also true for personal guarantors that are responsible for another person’s or business’s mortgage, car loan, credit card debt, or any other debts.
When you sign as a personal guarantor, you’re accepting the fact that you could be asked to make payments on that debt if the primary borrower defaults by missing a payment. If the primary borrower defaults for an extended period of time, the continued debt payments owed could accumulate to an amount that you yourself are unable to pay. If you file for bankruptcy, this debt will be discharged in a Chapter 7 case or included in a repayment plan in a Chapter 13 case.
Many people or other parties could find themselves in this situation. Almost anyone can sign as a personal guarantor including friends and family, businesses, or other parties with good financial standings. Personal guarantors help borrowers receive loans, reduce interest rates, and get better financing options overall.
If you’ve been asked to sign as a personal guarantor, it’s important to take several things into account about the primary borrower’s and your current and future financial situations. Take into consideration if your credit score will be affected and how and why the bank is requiring a guarantor. Also, consider if you have the funds to repay the debt if the primary borrower defaults, what might happen to your credit if the primary borrower defaults, and your relationship with the primary borrower.
If you feel comfortable signing as a personal guarantor after taking into account your options and situation, remember that you can most likely discharge that debt if needed through a bankruptcy proceeding. To learn more about personal guarantees and how to receive debt relief in Fairmont, MN through bankruptcy, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com
