When a credit defaults, the order in which a lender pursues the borrower, the collateral and the guarantors is a strategic decision with legal consequences.
Absolute and unconditional guaranties permit suit against the guarantor without first pursuing the borrower or the collateral. Where the guaranty is one of collection rather than of payment, exhaustion is required.
One-action rules and anti-deficiency statutes in several states restrict the sequence — requiring the lender to proceed against real property collateral first, or barring a deficiency after a non-judicial sale. Suing the guarantor first in such a state can extinguish the claim entirely.
Commercially reasonable disposition of personal property collateral is required, and a failure reduces or eliminates the deficiency. Guarantors have standing to raise it.
Fair value credit. Many states require the deficiency to be measured against the property’s fair value rather than the foreclosure sale price, determined by appraisal in a hearing.
Guarantor defences preserved despite waivers, including those the statute makes non-waivable.
Practical sequencing. Obtain a judgment against solvent guarantors early while the collateral process runs, subject to the state’s restrictions, because guarantors reorganise their affairs during a long foreclosure.