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ARTICLE · 10 MARCH 2021

It's Time To (Carefully) Secure That Guaranty

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The 2021 increase to California's homestead exemption to up to $600,000 stands to change the legal and economic relationship of guarantors with their lenders and vendors who make loans or sell...

United StatesFinance and Banking
Richard W. Brunette, Jr.
Richard W. Brunette, Jr.
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The 2021 increase to California's homestead exemption to up to $600,000 stands to change the legal and economic relationship of guarantors with their lenders and vendors who make loans or sell goods or services on credit. Before examining this important change in California's homestead exemption and its effect on guaranties, some perspective is needed on guaranties themselves.

In the stone ages when business loans were signed in a conference room with all parties present and exchanging pleasantries, I watched a borrower's principal sign a personal guaranty and wondered how meaningful that really was when the size of the loan likely dwarfed the net worth of everyone in the room. After most everyone had left, and the ink was drying on the loan documents (my primary job was to guard the documents, especially the promissory note), I asked my supervising attorney that question. Without hesitation, he explained,  "You just don't understand. First, a guarantor is a fool

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