Guaranty with pledged collateral

FOR VALUE RECEIVED, receipt of which is hereby and herein acknowledged, and to induce (the “Promisee”) to enter into the Agreement dated _______________________

with _________________________________  (the “Guarantor”), executed and effective simultaneously with the execution and effectiveness of this Guaranty, _______________                        (the “Guarantor”), hereby unconditionally and absolutely guarantees to the Promisee the performance by the Guarantor of each and every covenant, agreement and obligation of the party or parties under the Agreement including, without limitation, the payment to the Promisee (or, if applicable, his executors, administrators or personal or legal representatives or estate or legatees) of all sums due under the Agreement at the time such sums shall be due and payable.


The Guarantor pledges the following collateral as security under this Agreement.  The collateral shall be held by ________________ (person or corporation) and security shall be pledged in the form of ___________________.


The obligation of Guarantor under this Guaranty shall be a direct and primary obligation, and the Promisee shall not be required to exhaust any of the Promisee’s rights or remedies against the party or parties, or any Guarantor prior to making any demand on or invoking any of the Promises rights and remedies against a Guarantor.  In furtherance of the foregoing, Promisee may proceed, at one time or successively and without notice to any Guarantor, against any Guarantor, or against any one or more of them.  In any action brought by Promisee against a Guarantor under this Guaranty, no Guarantor shall be entitled to, and shall not, plead as a defense that Promisee is not legally or equitably insolvent or is dissolved or liquidated, and each Guarantor covenants and agrees to pay to the Promisee all costs and expenses (including attorney’s fees) incurred by Promisee in any such action.


This Guaranty and all rights, obligations and liabilities arising hereunder shall be

construed and enforced in accordance with the laws of the State of _________________


This Guaranty shall bind each Guarantor below and each Guarantor’s respective successors and assigns, and shall inure to the benefit of Promisee and Promisee’s executors, administrators, personal and legal representatives, and estate and legatees.


IN WITNESS WHEREOF, this Guaranty has been duly executed by the Guarantor(s) on








_________________________                                  ____________________________

Guarantor                                                                    Guarantor (if a second one)



Guaranty with pledged collateral

Review List


This review list is provided to inform you about the document in question and to assist you in completing it.


  1. A Guaranty is similar to a Promissory Note because it creates a conditional obligation to pay a debt.  Proper accounting requires that the Guaranty be shown as a liability on the personal financial statements of the Guarantor or Guarantors.  In other words, this is a very serious financial commitment and the Guarantor should be sure to seek business advice before undertaking this kind of serious financial commitment and assure him or herself that the benefits of the Agreement being guaranteed are worth the financial risk being taken by being a Guarantor to this Agreement.


  1. If you are the Promisee, or the recipient of the benefit of the Guarantor’s signature, and the Guarantor is a corporation, make sure that the person signing the Guaranty is authorized by his or her corporation to sign and that the Guaranty does not violate any provision in the corporation’s Articles of Incorporation or Bylaws.


  1. The Promisee should understand that this guarantee is a “promise” not a guarantee of payment under the original Agreement or under this guarantee by the Guarantor or Guarantors.  A Guaranty is only as good as the financial condition of the Guarantor except in this instance when collateral is required in the form of a pledge of certain assets such as real estate, stocks or bonds, or other liquid financial instruments.  The Promisee should be certain, as with any collateral, that his or her rights are “perfected” in the collateral.  Since collateral and perfection are involved, you are well served to have a lawyer review this document and these provisions in particular so you are best protected should the Guaranty have to be called.


  1. As with all documents, laws vary from state to state and change over time.  Before using this document, have a lawyer review it before signing it.


  1. In addition, if you are forced to seek collection under this Guaranty, your state laws may require that certain actions first be taken against the party that created the original obligation, up to and including filing a lawsuit.  Consult an attorney if enforcement of the Guaranty becomes an issue.


  1. The Promisee should keep the original Guaranty with the note or other instrument that is guaranteed in a secure location such as a home safe and have copies made and stored, preferably, with your attorney and/or accountant.


  1. If you are in a business or situations of dealing with financially fragile or unstable entities, such as with young adults or new companies, we strongly recommend you use this guaranty to back up rent payments (perhaps by the parents of a student or a young adult), accounts payable to new firms (by the principals), and other such situations.  If you have forms “handy” when the initial transaction is made, it is much easier to gain a signature.


  1. Collections under Guaranties are often best made in small steps.  First, consider reducing the Guaranty to an agreed upon Promissory Note with interest and collection costs awarded to you if not paid in the additional time you grant for extension (anything from 1 month to several years, depending on your negotiating leverage).  If not paid under these terms, seek a court order for judgment under the Promissory Note.  As a rule, you are well advised to employ a legal specialist to do this; in this case a Collection Attorney.  They are specialists in the field and will often undertake the process on a contingency or percentage basis, if you desire that option.  The presence of collateral will vastly improve your chances for collection either through concern on the part of the Guarantor or Guarantors, which make them, pay “up,” or by actual liquidation.


  1. If the liquidation of collateral brings you less than the amount due under the Guaranty, you are still able to collect the balance from the Guarantor or Guarantors on an unsecured basis.


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