Published in the February 2010 issue of The Registry.

In real estate, the personal guaranty is pervasive.  The loans it backs are the industry's lifeblood, allowing investors to buy, build and improve residential and commercial projects. In up markets, debt can leverage a small slug of equity into a huge return.  But in a recession and credit crunch, leverage multiplies losses.  Asset values decline, cash flow won't pay debt service, and there is no replacement financing.

That is where tens of thousands of developers, owners and investors find themselves today.  Their equity is lost, and their exposure on guaranties is many times their net worth.  They risk owing immense debts after already losing everything.

But all is not lost.

Resources

• Snatching Retreat from the Jaws of Rout - PDF