personal liability

personal liability

The responsibility of a person to pay a debt or other obligation.If an individual signs a promissory note, that individual usually has full personal liability for the debt. An exception is the unusual situation of a nonrecourse individual loan,in which the lender agrees to look only to the collateral for recovery in the event of default.Some states protect consumers from liability for a first mortgage loan on a personal residence,and require that the lender must be satisfied with taking the home by foreclosure,but may not sue for a deficiency.If a corporation signs a promissory note, the individual shareholders will not have personal liability unless they signed a guarantee agreement or unless the lender is successful with an alternate legal theory such as “piercing the corporate veil.”