Legal Question in Real Estate Law in Alabama

Defaulting on a corporate loan

I have considerable real estate assets and will be putting them in a corporation to avoid personal liability. I am then going to be going to a hard money lender to borrow against the real estate. The money will be used to fund acquisition, current operations, and expansion. The money is also needed to pay salaries. According to my plan I will be able to pay off the loan but if I am somehow not, will the salary paid to me personally raise an eyebrow if everything falls apart and the loan goes into default and foreclosure? Or will it simply be a matter of them foreclosing and me either fighting them or losing the assets?


Asked on 2/25/02, 10:11 am

1 Answer from Attorneys
Michael Cortson Law Office of Michael D. Cortson, Esq.

Re: Defaulting on a corporate loan

My experience has shown that small corporations have to have a personal guarantee from owner. You might still be on the hook. The small companies that I represent have always had the bank want a personal guarantee. I have a client in California going through that right now. When I was in Los Angeles and a partner in a large firm we were a corporation and the bank always asked that we sign a personal guarantee or no money. California has an anti-deficency statute that limits liability to the property only. I do not know if Alabama has a similar structure. Just make the money and you won't have to worry.

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Answered on 2/25/02, 10:21 am


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