Pink Floyd Songs and Commercial Collections – Wish You Were Here

Guarantors, Modifications of Terms, and Reaffirmations of Guaranty Obligations

“Wish You Were Here”

Dealing with guarantors is one issue that creditors often appear to ignore. Most business loans come with personal guarantees obliging people to support the debtor’s performance. Many creditors may “wish the guarantors were here” for purposes of recovery if the duty of the guarantors is not adequately secured in the event of a default. Consider the following difficulties, or don’t. Many guarantors and debtors have recently begun using the Equal Credit Opportunity Act’s (“ECOA”) provisions as a defense against guarantor litigation. When a spouse or other entity/person is a guarantor, it is self-evident because there seems to be a “tenuous-at-best” tie between the company and the guarantee. To avoid this problem, a creditor should properly establish at the beginning of the loan the prospective guarantor’s relationship with the debtor (e.g., is s/he an officer, shareholder, or member of the debtor?). Or establish that the prospective guarantor’s assets are a sufficient/necessary factor in persuading the creditor to make the loan.

When this happens, it’s crucial to have everyone who gave a guarantor approval reaffirm the adjustments. To avoid a later claim that the guarantors did not consent to change the terms and that such changes rendered the guaranty agreement(s) void because the guarantors’ exposure was increased without consent, it is sufficient to have the guarantors simply co-sign the “change in terms” agreement. A “Guarantor Consent, Reaffirmation, and Waiver” section or separate document should ideally be included in the change in terms (including when such change is the result of a forbearance agreement). By doing this, any uncertainty regarding the guarantors’ agreement to the modified terms is eliminated.

We would like to acknowledge Ron Steen at Thompson Burton in Tennessee as the original author of this tongue-in-cheek look at Pink Floyd and the Debt Collection Legal Industry



Marcadis Singer, PA
5104 South Westshore Blvd.,
Tampa, Florida.
Phone: (813) 288-1881

Close Popup

We use cookies to give you the best online experience. By agreeing you accept the use of cookies in accordance with our cookie policy.

Close Popup
Share This