A business default does not automatically make an owner personally liable. The answer is in the guaranty. Creditors sometimes treat it as an attachment to the loan file. It is not. A guaranty is a separate contract, and its language determines whether there is a claim against the individual.
This follows the earlier discussion of what a creditor should review before filing suit against the borrower. The focus here is the personal guaranty.
Start With the Signature
Find the executed guaranty, not a blank form or an unsigned copy. Under Florida Statutes section 725.01, a promise to answer for another person’s debt generally must be in writing and signed by the person to be charged.
Check whether the individual actually signed as guarantor. An owner’s signature on the company’s note, lease, or credit application does not, by itself, create personal liability. The creditor needs a signed writing that imposes a personal obligation.
Read the whole guaranty, not just the signature block. Does it identify the person by name as “Guarantor”? Does it say that the signer personally guarantees the borrower’s obligations? Is there a separate signature line for the individual? Did the person sign with a company name or title?
In Pierre’s Caribbean Cuisine LLC v. LeaseFlorida LLC, 405 So. 3d 833 (Fla. 3d DCA 2025), a commercial tenant’s principal signed the guaranty only in his individual capacity. The Third District held that the guaranty, including its jury-trial waiver, was enforceable against the individual signer but not against the tenant, which did not sign or adopt the guaranty.
The reverse error is common. An officer signs a company document without clearly showing a representative capacity. In Betz v. Bank of Miami Beach, 95 So. 2d 891, 894–95 (Fla. 1957), the Florida Supreme Court held corporate officers personally liable as makers of notes. The corporation’s name appeared above their signatures, but the document did not state that they signed for the corporation or in a representative capacity.
Betz involved promissory notes, not a guaranty, and it interpreted the former Negotiable Instruments Law. It is not a guaranty case. The practical point remains: the document should leave no uncertainty about who agreed to be bound and in what capacity.
Determine What It Covers
A guaranty may cover one debt or a continuing line of credit. It may include renewals, extensions, future advances, interest, late charges, collection costs, and attorneys’ fees. It may also cap the guarantor’s maximum liability.
Read the definitions and later documents. A guaranty signed for the original loan may not cover a later advance, changed payment terms, or a new loan. The creditor should identify the provision that ties the guaranty to the debt now being collected.
An absolute guaranty of payment may allow a creditor to proceed against the guarantor after the borrower defaults, without first suing the borrower or exhausting collateral. A guaranty of collection may require action against the borrower, collateral, or both before a claim may be brought against the guarantor. The label is less important than the actual remedial language, waivers, demand requirements, and conditions to liability.
If the Borrower Files Bankruptcy
A borrower’s bankruptcy filing does not usually prevent enforcement of a personal guaranty against a nonbankrupt guarantor.
The automatic stay under 11 U.S.C. § 362 generally protects the debtor and estate property. It does not ordinarily protect separate nondebtors, including guarantors and co-obligors. Section 524(e) of the Bankruptcy Code provides that a debtor’s discharge does not affect another entity’s liability for the same debt or another entity’s property for that debt. A creditor may therefore generally proceed against a nonbankrupt guarantor after the principal borrower files bankruptcy or receives a discharge.law.
A bankruptcy court can, in an unusual case, extend protection to a nondebtor guarantor or enter an injunction. The guarantor’s potential reimbursement or contribution claim against the debtor normally is not enough. Courts require a stronger basis, such as an identity of interests that makes the guarantor litigation effectively litigation against the debtor, an absolute indemnity obligation, or a showing that the litigation would materially interfere with a legitimate reorganization.
Before proceeding, review the bankruptcy docket for a stay-extension order, a § 105 injunction, or plan language that expressly protects the guarantor.
Practice Points
Before suing a guarantor, a creditor should:
- Obtain the signed guaranty, the underlying obligation, and every amendment, renewal, extension, or workout agreement.
- Confirm that the borrower, guarantor, and debt are identified consistently and that the guarantor signed in an individual capacity.
- Identify the scope of the guaranty, including any cap, expiration date, termination right, limit on future advances, or restriction on fees and interest.
- Determine whether the guaranty requires demand, notice of default, notice of acceleration, prior action against the borrower, or prior resort to collateral.
- Reconcile the claimed balance with the payment history, interest and fee provisions, credits, and proceeds from collateral.
- If the borrower has filed bankruptcy, review the docket before pursuing the guarantor.
Before filing suit, the creditor should be able to identify the signed guaranty, the obligation it covers, the amount due, and the provision that permits recovery from the individual.
Next in the series: When a Florida Creditor Should Consider a Receiver After Default. A judgment may establish the debt but still arrive too late to protect the assets that could satisfy it. The final article examines when Florida law permits a receiver to preserve commercial real estate, business assets, rents, receivables, or—after an unsatisfied execution—property of a corporate judgment debtor, and why receivership remains an exceptional remedy rather than a routine collection tool.
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