removing myself as personal guarantor on SB loan

[paradi]

Forgive me if I seem green... I must admit finance is not something I even remotely understand...I am simply trying to find out information to help my husband...

If you can in ANY way help me I will be forever greatful.

Long story short. My husband, who has nearly perfect credit...his credit is in the low 800's...was approached by my parents the end of 2006 to be a personal guarantor for a loan they wanted to take out in order to fund a business.

We all sat down, VERBAL agreements were made (yes, I know... mistake) and basically when everything was said and done my husband had taken out a line of credit in the amount of 50K in order for my parents to start their business.

Everything started off great, but very shortly after we realized that the initial monies that were agreed upon to be set aside for monthly payment on the loan were not set aside, they were using business money as a means to pay off personal bills, so on and so forth.

From the beginning we have always been under the impression that a personal guarantor would only be required on the loan for the first year period and that after such year he would be easily removed leaving all financial responsibility to the business itself.. meaning my parents.

We have had the loan for 5 months and the loan is no closer to being paid off than the day it was opened as my parents make the monthly payment and then turn around and spend the money again...withdrawing money vs. using the cc in order to not show where money is going. (yes, they have the debit card)
Also, the account has been overdrawn for a 2 day period on one occasion and on 2 occasions has been just under 5 days late for payment. (will this greatly affect his credit?)

All checks that need to be signed have to be signed by my husband as he is the only one shown on the account and is shown as the president of the company currently... also, which my parents set up.

SO... my obvious question would be to anyone.. if they happen to be familiar with the process of removing a personal guarantor and if so what is our first step. If knowing the bank helps you then so be it.. it is Washington Mutual.

He wanted to go to the bank and talk to the gentleman who opened the loan for him but is afraid that he would appear shady, which we are not!!!
If we have to we will pay the damn thing ourself... but are trying to go to great lengths in order to avoid that.

Again... any information you can provide us with would be tremendously appreciated.

This is definately a situation we will NEVER put ourselves in again!!

[SteveC]

If your husband is shown as the president of the company and is in effect the only named bank user… I would immediately cancel the existing debit card associated with the account… and I would use the cheque account to record everything… I would then seek professional advice, as you may end up having to take the company over to get your money back.

[BillR]

Presumably the bank required your husband to be the guarantor because the parents did not have good enough credit.

Did the bank specifically say that they were going to release him from the guarantee after 1 year? I would doubt it - the bank has nothing to gain by doing that - and they have everything to lose.

I'd agree on cancelling the debit card and making sure all payments are made with checks - it makes the accounting much easier anyway, depending on how your bank does the format of it's electronic records.

[paradi]

NO... it was a gentleman who helped my parents with the loan who told my husband that information. And YES he was made the personal guarantor because my parents both fell short of the 700 credit score requirement.
Being that it is my husbands name attached to everything here do we have any legal rights?

I ask because my relationship with my parents is a tumultuous one now as all of this has transpired and ultimately my concern is my husband, and our families well being.

[paradi]

Originally Posted by SteveC

If your husband is shown as the president of the company and is in effect the only named bank user… I would immediately cancel the existing debit card associated with the account… and I would use the cheque account to record everything… I would then seek professional advice, as you may end up having to take the company over to get your money back.

What sort of attorney would we look for??? Again...being green?? And thank you BOTH for your information, it is SO much appreciated!!

[BillR]

A couple of questions:

1.) What type of company is it? LLC? S-Corp? C-corp?
2.) Is your husband an officer of the company?
3.) Is your husband a sharehold in the company? If so, what % of voting stock does he have?

[Toolman]

In my opinion, if he is shown as the president of the company, and is the person of record with the bank, he must take that duty, cancel the debit card, and pay for everything by check. He must take full control of all of the finances, so that he knows everything that is going on.

The bank will most likely not let him off as the guarantee. It would compromise their position, and, as has been said, they have nothing to gain.

You need the professional counsel, as you may have to take over the company, make it profitable, pay the bills, and possibly sell it to get everything paid for.

Best wishes!