If the personal property securing the loan is transferred to a new legal owner, such as a different LLC or a trust, your bank should either modify the guarantee agreement to include the new owner as a guarantor (with the new owner’s signature) or enter into a separate guarantee agreement with the new owner. Either way, the goal is obtain the new owner’s agreement to the terms of the guarantee so that the property will continue to secure the loan.

We should note that, as a general rule, a transfer of personal property securing the loan to another party likely would violate the terms of either your guarantee agreement or the mortgage or note, as the case may be. In such event, you could opt to declare the borrower to be in default.