Property Owner Bankruptcies and Personal Guaranties: What’s Next?

In the wake of COVID-19, default rates for commercial real estate loans, including those supported by personal guaranties, will likely accelerate. Inevitably, borrowers will consider seeking bankruptcy protection to implement a restructuring of debt or a sale of real property collateral, and lenders should not assume that personal guaranties will prevent borrower bankruptcies. In “Personal Guaranties May Not Deter Property Owner Bankruptcies,” colleagues Patrick J. Potter, Joshua D. Morse, Deborah B. Baum and Dania Slim discuss that lenders should plan for real estate owner bankruptcies despite having a non-recourse carveout guaranty triggered by the owner’s bankruptcy filing.