Personal Guaranties in Georgia: What You're Really Signing

It must be in writing, and the writing must be complete

Under Georgia's statute of frauds, "a promise to answer for the debt, default, or miscarriage of another" is binding only if it's in writing and signed by the person to be charged (O.C.G.A. § 13-5-30(2)). The Georgia Supreme Court has held that the writing must identify the debt, the principal debtor, the promisor, and the promisee (Lafarge Building Materials v. Thompson, 2014). Courts read the guaranty together with documents it incorporates, like a credit application, and naming the debtor by its trade name can be enough (Colonial Oil v. Lynchar, 2018).

For creditors, the lesson from Lafarge is simple: name the principal debtor directly in the guaranty itself.

A guarantor is liable alongside the company

Georgia draws "no distinction between contracts of suretyship and guaranty" (O.C.G.A. § 10-7-1). Unless the guaranty says otherwise, the guarantor is jointly and severally liable with the business. In practice, a creditor can usually come after you without first exhausting its remedies against the company, and many forms say so expressly.

The protections the law gives, and how forms waive them

• Changes to the deal: if the creditor and the business change the nature or terms of the obligation without the guarantor's consent, that "novation, without the consent of the surety, discharges him" (§ 10-7-21).
• Acts that increase your risk: a creditor's act that injures the guarantor or increases the guarantor's risk can also discharge the guarantor (§ 10-7-22).
• Notice to sue: after the debt is due, a guarantor can send a statutory written notice telling the creditor to sue the business; if the creditor doesn't sue within three months, the guarantor is discharged (§ 10-7-24). The notice must contain specific language.
• Waivers: Georgia courts hold that the protections of §§ 10-7-21 and 10-7-22 "can be waived in advance" (Ramirez v. Golden, 1996), and the Georgia Supreme Court enforced a broad suretyship waiver in York v. RES-GA LJY (2017). Most commercial guaranty forms include these waivers, so don't count on the statutory defenses.

What to negotiate before you sign

• A dollar cap, such as a set number of months of rent or a maximum credit amount.
• A time limit or burn-off: the guaranty ends after a period of on-time payment, or after the first lease term.
• Limited scope: only the specific lease or account, not "all present and future obligations" of the company.
• A right to end the guaranty for future credit by written notice.
• Release when you sell your interest in the business, or when the company is sold.
• Notice before the creditor extends more credit or changes terms.
• Several, not joint, liability among multiple owners, so each guarantees only a share.

Does your spouse have to sign?

Georgia guaranty law doesn't require a spouse's signature; the statute requires the signature of the person being bound. And federal Regulation B under the Equal Credit Opportunity Act generally bars a creditor from requiring the signature of an applicant's spouse when the applicant qualifies on their own. A creditor may ask for an additional guarantor, but "shall not require that the spouse be the additional party" (12 C.F.R. § 1002.7(d)). If a lender insists your spouse sign, ask why, and get advice before agreeing.

Attorney's fees and collection

Most guaranties include an attorney's fee clause. Georgia's statute on fee clauses in notes and other evidence of indebtedness caps stated-percentage fees at 15% and requires written notice and a 10-day chance to pay without fees (O.C.G.A. § 13-1-11). Whether and how that statute applies to a particular guaranty depends on its wording, so have a lawyer review it if a creditor demands fees. For more on fee clauses, see invoices, late fees, and interest.

Frequently Asked Questions