Subchapter V and Personal Guarantees: Are You Still Liable?

Most Miami business owners who sign a bank loan, an SBA loan, or a commercial lease sign something else along with it: a personal guarantee. That one signature is why a business bankruptcy so often does not end the owner’s problem. You can restructure your company through Subchapter V and still get a call from the same lender about the same debt, only now it is aimed at you personally.

This guide explains how personal guarantees work in Subchapter V, where owners are and are not protected, and what options you have. For background, start with our overview of Chapter 11 and Subchapter V for small businesses in Florida or check who qualifies for Subchapter V.

What a Personal Guarantee Actually Does

A personal guarantee is a separate promise. The company borrowed the money, but you promised to pay if the company could not. Legally, you and the company are two different debtors, which means the lender has two different parties to collect from.

Banks and the SBA commonly require guarantees from owners. Landlords often require them on commercial leases, and equipment lenders and suppliers frequently do too. Many guarantees are written so the lender can go after you directly without first suing the company, so the lender may have more than one way to collect.

Does Subchapter V Protect the Guarantor?

Usually, not automatically. There are three reasons.

The automatic stay protects the debtor, not you. When your company files, collection against the company stops. That does not automatically cover you as a non-filing guarantor. Courts can sometimes extend temporary protection to an owner who is essential to the reorganization, but that is the exception, not something to count on.
The discharge protects the debtor, not you. Under Section 524(e) of the Bankruptcy Code, discharging a debt does not release anyone else who is liable on it. A guarantor stays on the hook.
The plan cannot force a release. In Harrington v. Purdue Pharma (2024), the U.S. Supreme Court held that a bankruptcy plan cannot impose a non-consensual release of third parties. A lender has to agree to let you off the guarantee.

What Usually Happens in Practice

A few patterns come up again and again.

The lender keeps pursuing you. If the lender is unhappy with the proposed plan, it may sue the guarantor while the company case is pending. If that happens, our guide on what to do if you are sued by a debt collector in Florida applies to you as well. Deadlines to respond are short.
The plan reduces what you owe. Every dollar the company pays the lender under the plan reduces the guaranteed balance. A plan that keeps the lender performing can shrink your exposure over time.
The lender agrees to a deal. Unlike traditional Chapter 11, Subchapter V does not require a class of creditors to vote yes for a plan to be confirmed. That gives the business more leverage, and lenders know it. It is common to negotiate a plan in which the lender accepts payments from the business, sometimes with a contribution from the owner, in exchange for modifying or releasing the guarantee.

Your Options as the Owner

Depending on the size of the guarantees and what you own, owners generally choose among a few paths:

File for the business only and design the plan around the guaranteed lender, so that lender stays paid and has less reason to pursue you.
File for the business and for yourself. If the guarantees are large, you can file a separate personal case. Chapter 7 may fit if the guarantees are the main problem and you have few non-exempt assets. Chapter 13 may fit if you have steady income and want to keep property. In some cases an individual owner can use Subchapter V too, since a guarantee of business debt can count toward the business-debt requirement, depending on the facts.
Negotiate before filing. A workout or modified guarantee with the lender sometimes avoids a filing altogether, or at least sets up a cooperative plan.

If you file personally, Florida’s homestead protection can be a major factor in what you keep. We cover how it works in Florida’s homestead exemption and bankruptcy.

Mistakes to Avoid

Assuming the company filing wipes out your guarantee. It does not, unless the lender agrees.
Moving assets or paying yourself first. Courts can undo transfers made before filing, especially to family members or insiders, and the look-back period can reach back years.
Waiting until there is a judgment against you. Once a lender holds a judgment, it can pursue garnishment and liens, and your options narrow.
Putting more personal money into the business without advice. Owner loans and payments made right before filing get scrutinized.
Signing a new guarantee or amendment during a workout without review. A small change in wording can expand your exposure.

How the Debt Limit Fits In

Guarantees can also affect eligibility. If you file individually, your own debts count toward the Subchapter V cap, currently $3,424,000. Congress has passed legislation to restore the limit to $7.5 million, and it applies only once signed into law, so the current number controls until then. Our comparison of business bankruptcy options in Florida and our Subchapter V timeline show how the process works either way.

What to Bring to a Consultation

Copies of every guarantee you signed, plus the loan or lease it supports
Current balances and any default or demand letters
Any lawsuits, judgments, or garnishment notices
A list of your personal assets and debts
Recent business financials

Talk Through Your Exposure

Whether a guarantee can be managed through the company’s case or needs its own strategy depends on the document you signed and the lender on the other side. Alexis Garcia Legal helps business owners throughout Miami, Doral, and South Florida look at the whole picture, the company and the owner, with 19 years of bankruptcy experience.

Call us today at (305) 428-2858 or schedule your free consultation online. Every consultation is confidential and available in English or Spanish.

Se habla español.

Disclaimer: This blog post is for general informational purposes only and does not constitute legal advice. Bankruptcy laws and debt limits change, and every guarantee and every business is different. Please consult with a qualified Florida bankruptcy attorney for advice specific to your circumstances.

Subchapter V and Personal Guarantees: Are You Still Liable for Your Business Debt?