I recently opened a new retail wine store and of course have many financiers all of which are working with me on repayment except for one, I borrowed 35k with agreed repayment of 50k on this loan, and have repaid 26k to date. I verbally via email agreed to personally guarantee this debt, Is that enforceable as a formal personal guaranty in court ? I'm assuming worst comes to worst if i file chapter 7 that would relieve me from that personal guaranty on a corporate debt? Plus there is no formal promissory note it was mainly a handshake loan, there is no documentation. Is the creditor allowed to charge 283 dollars a day in interest on the principal balance? today my balance has gone back up to 65k with interest even with my payments of 26k. If I miss a weekly payment of 3k he automatically starts accumulating 2k in interest a week, I confirmed the max allowed chargeable interest in the state of CT is 17% and of course this investor is attempting to charge much more allowed then by the state. I want to know if i filed chapter 11 for the business and reorganized, would I be personally liable for this debt sine he is a unsecured creditor but i verbally via email gave personal guaranty is that enforecable?Thank You muchSohil
Country relating to Question: United States
State (if USA): Connecticut
I verbally via email agreed to personally guarantee this debt, Is that enforceable as a formal personal guaranty in court ?A: The promise to guarantee the debt of another (even another business) must be in writing. However, email is a writing. If you agreed to personally guarantee the debt before the loan was made, via an email, then assuming that the lender can prove that the email actually was sent by you (not tremendously difficult, but sometimes harder than it might initially appear), then that Personal Guarantee is enforceable in court. I'm assuming worst comes to worst if i file chapter 7 that would relieve me from that personal guaranty on a corporate debt?A: Correct.Plus there is no formal Promissory Note it was mainly a handshake loan, there is no documentation. A: Apparently, there is an email, and that's documentation. Is the creditor allowed to charge 283 dollars a day in interest on the principal balance?A: The maximum personal loan rate in Connecticut is 12%. On $65,000, that's about $21 per day. Loans by licensed commercial lenders and business loans can exceed the "usury" interest rate. However, it depends on the provable terms. I believe a court would be reluctant to accept that you and the lender agreed to a rate of 159% per year, which is what $283 works out to, approximately. I want to know if i filed chapter 11 for the business and reorganized, would I be personally liable for this debt sine he is a unsecured creditor but i verbally via email gave personal guaranty is that enforceable?A: If the loan terms are proved, then you may be liable, though I seriously doubt that the 159% per year rate would be found enforceable. Courts can refuse to enforce a Contract term or condition that is "shockingly unfair" (legally termed, "unconscionable"). Chapter 11 is extremely costly. It's probably not worth it. You may be better off filing Chapter 7, closing down the existing business and starting a new one under a new corporate filing.Hope this helps. NOTICE: My goal here is to entertain while educating the public about the law. I hope my answer is useful and informative to you. During our conversation, the website may ask you to rate my answer. If you rate my answer lower than the middle rating, then the website retains your entire payment, and I receive nothing. It is entirely your choice as to how you rate my answer. However, because your payment to me is in the nature of a donation/Gift, rather than as compensation for any services rendered, you are entitled to know how your rating affects the final distribution of your donation. If you need to contact me again, please put my user id at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Please Click the following link for IMPORTANT LEGAL INFORMATION. Thanks and best wishes!
Attorney and Real Estate Broker -- Retired (mostly)
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