Guarantors secure a credit account by "guaranteeing" that the account will be paid as agreed. Although most guarantors are individual co-borrowers on an account, a company sometimes serves as the guarantor of certain debts -- for example, work-related medical evaluations. Irrespective of the nature of the relationship, a creditor usually has the right to sue a guarantor to satisfy an outstanding debt.
A guarantor's purpose is to agree, under the guarantor's own credit, that an outstanding debt will be paid according to the debt contract. In many cases, a guarantor is considered a co-borrower; for many auto loans, for example, the guarantor is a co-signer whose name appears on the car title and loan note. In other cases, the guarantor is not a party to the debt but nevertheless agrees to lend his own creditworthiness on behalf of some other debtor. In medical contexts, parents are almost always the guarantor on a child's hospital accounts.
Although the exact language can vary from contract to contract, in general, a guarantor has the exact same legal obligation to a debt as the primary debtor. The creditor may engage in the full range of collection activity against the guarantor as soon as the primary debtor goes into default -- and the collection activity can include phone calls, lawsuits, liens, garnishments and levies.
Exceptions to Liability
If a material defect exists in the original contract -- i.e., the contract is unenforceable on its face -- or if the primary debtor or the creditor acted fraudulently, then the guarantor may be released from liability. In some cases, a guarantor could sue to have his name removed from a debt if he can prove the debtor acted in bad faith.
Creditors take different approaches to collecting on bad debt. Some may exhaust all their options with the primary debtor before contacting the guarantor, while others may contact the guarantor simultaneously with the debtor even on simple first-issue late notices. Because most guarantors have sufficient assets to cover the debt (otherwise, they wouldn't have been approved as a guarantor) the creditor usually doesn't need to pursue aggressive collection; the guarantor has a strong interest in protecting his own credit record. However, barring an usual provision in the debt contract, the guarantor may be sued to recover the debt irrespective of any collection activities that may or may not be directed to the primary debtor.
Jason Gillikin is a copy editor and writer who specializes in health care, finance and consumer technology. His various degrees in the liberal arts have helped him craft narratives within corporate white papers, novellas and even encyclopedias.