You say the SBA does not have a mortgage or lien on your house so ‘its safe!’ Not so!

If only it was that easy. Unfortunately they are smarter then that and have laid a trap for you that many fall into unbeknown to themselves. The personal guaranties is a path to everything you and your wife own.

Keep in mind that almost every SBA loan we see and certainly many non SBA guaranteed normal secured bank loans require  spousal guarantees on the notes.

This may appear harmless in the beginning when all is well, but in the end when default is looking and you review your exposure, please count your home as ‘in jeopardy’. It too will be additional collateral to the loan, as follows:

At some point in the default process, the bank will seek and get a lien on your home. That is as good as a mortgage as it attaches the note to the collateral home. They get there by following the two guarantees provided from the principal borrower and his/her spouse.

Thus when push comes to shove, your home is in jeopardy and becomes a target for either liquidation or simply pressuring the borrower into compliance on some level more then one would provide if the home was not at risk. That is the reality…One way or another the SBA will get to your home and every other asset you own.

The answer of course is to workout the debt and settle it for affordable losses, and not risk losing the house altogether. This is discussed elsewhere in this blog, however the important point to understand is that once the spouse signs the guaranty, everything the family owns is then collateral for the note and can be liquidated upon default, liqidated by foreclosure and auction

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