Suretyship Defenses and Bankruptcy Issues in Guaranties

Summary

This practice note discusses suretyship defenses under common law and the treatment of guaranties in a bankruptcy proceeding. Although not all surety relationships are guaranties, all guaranties are surety contracts and the general common law of suretyship applies to guaranties. In addition to suretyship defenses, a guaranty can be susceptible to attack as a fraudulent transfer under both federal bankruptcy law and applicable state law or may be avoidable under other bankruptcy law concepts.