In the current financial climate, when a borrower defaults on a loan, lenders generally attempt to collect the loan balance owing from the guarantors of the loan. However, lenders fail to recognize that when the lender voluntarily eliminates the debt owing by the principal borrower, the bank gives up its rights to collect anything from the guarantors because the debt owing has been extinguished.
John N. Hindo, Esq. defended the Guarantors of a $1.6 million loan deficiency in Michigan Commerce Bank v Palms Investments, LLC, et. al., Wayne County Circuit Court, Case # 2010-003240-CK. In that case, the Wayne County Circuit Court ruled that when the lender voluntarily waived its right to seek a deficiency against the corporation, no debt existed for which the guarantors could be liable. The Court also stated that Guarantors are liable only to the extent that the principal debtor is liable to the creditor. The Michigan Court of Appeals affirmed the ruling of the Circuit Court. See the attached opinion from the Michigan Court of Appeals.
For more information on this topic please feel free to contact John N. Hindo, Esq. at 248-223-9830.