- Most creditors send a formal demand letter before suing, setting out the amount owed, the basis for the claim against you as guarantor, and a deadline to pay.
- Depending on the amount claimed, the creditor will file either a Plaintiff's Claim in Small Claims Court or a Statement of Claim in the Superior Court of Justice.
- Realistic areas to examine include: - [ ] Was the guarantee properly in writing and signed?
You signed a personal guarantee for a business loan, commercial lease, or line of credit — maybe years ago, maybe as a routine condition of getting financing off the ground. Now the underlying borrower has defaulted, and the creditor is coming after you personally. It's an unsettling place to be, especially if you assumed the guarantee was a formality that would never actually be called on.
Being sued on a personal guarantee in Ontario follows the same general civil litigation process as any other debt claim, but it comes with its own wrinkles — starting with the fact that guarantees have specific legal formality requirements that don't apply to most contracts.
Step 1 — The Demand Before the Lawsuit
Most creditors send a formal demand letter before suing, setting out the amount owed, the basis for the claim against you as guarantor, and a deadline to pay. This isn't just a courtesy — it also builds the creditor's case that you were given a fair opportunity to resolve the matter before litigation started.
If you receive a demand letter, don't ignore it. Even if you dispute the amount or your liability, respond in writing and get legal advice quickly — the clock on your options starts running immediately.
Step 2 — The Lawsuit Itself
Depending on the amount claimed, the creditor will file either a Plaintiff's Claim in Small Claims Court or a Statement of Claim in the Superior Court of Justice. Small Claims Court has a defined monetary ceiling that is adjusted periodically — as of mid-2026, confirm the current limit before assuming which court applies, since claims above it must proceed in Superior Court.
Once you're served, you generally have a set window to respond — as of mid-2026, the standard period is 20 days if you were served in Ontario, and longer if served elsewhere in Canada, the U.S., or internationally, though you should confirm the current rule applies to your claim type. Missing this deadline is one of the most damaging mistakes a guarantor can make: if you don't file a defence in time, the creditor can move to note you in default and potentially obtain judgment without a trial.
Step 3 — Building Your Defence
Not every personal guarantee holds up, and not every guarantor is without options. Realistic areas to examine include:
- [ ] Was the guarantee properly in writing and signed? Ontario's Statute of Frauds generally requires a guarantee to be evidenced in writing and signed by the guarantor to be enforceable — a purely verbal guarantee is on much shakier legal ground.
- [ ] What does the guarantee actually say? Some guarantees are limited to a specific amount, a specific debt, or a specific time period; others are broad, continuing guarantees covering future advances. Read the exact wording carefully.
- [ ] Has the underlying debt been accurately calculated? Creditors sometimes claim amounts that include disputed fees, interest, or charges beyond what the guarantee actually covers.
- [ ] Was the guarantee obtained through misrepresentation or undue pressure? These are narrow defences, hard to establish, but worth raising if the circumstances were genuinely questionable.
- [ ] Has the creditor already recovered from the debtor or collateral? Amounts recovered elsewhere may need to be credited against what you owe.
- [ ] Was the guarantee released or superseded by a later agreement between the creditor and borrower without your consent? Material changes to the underlying deal can sometimes affect enforceability.
None of these defences are guaranteed to succeed — each depends heavily on your guarantee's specific wording and the facts — but they're worth investigating before assuming the claim is unbeatable.
Personal Guarantee Lawsuit: Typical Path
| Stage | What Happens |
|---|---|
| Demand letter | Creditor sets out the amount and deadline to pay |
| Claim filed | Plaintiff's Claim (Small Claims) or Statement of Claim (Superior Court), depending on the amount |
| Service | You're formally served with the claim |
| Defence deadline | Generally 20 days if served in Ontario; longer if served elsewhere |
| Settlement conference / mediation | Common step before trial, especially in Small Claims Court |
| Judgment | If unresolved, the court decides after trial (or by default if you don't respond) |
| Enforcement | If the creditor wins, they can pursue garnishment, seizure, or other tools to collect |
Step 4 — If a Judgment Is Entered Against You
If the creditor obtains judgment, Ontario law gives them several enforcement tools: garnishing a bank account or wages, registering a writ of seizure and sale against your property, or examining you under oath about your income and assets. Ontario law shields a portion of wages from garnishment for ordinary debts, but a meaningful share can still be taken — not a safety net worth counting on.
Judgments also carry court-set interest, and both interest rates and enforcement fees are set and adjusted periodically by the province — don't assume a figure from last year, or from a general website, still applies; confirm the current rate before budgeting around it.
Practical Steps If You've Been Served
- Note the service date immediately and calendar your defence deadline — don't estimate it.
- Locate your original guarantee document and read every clause, including any limits on amount, time, or scope.
- Gather any correspondence about the underlying loan or lease, including anything showing amendments made after you signed.
- Get legal advice before responding to the creditor directly — what you say (or don't say) can affect your defences later.
- Don't assume settlement isn't possible; many guarantee disputes resolve through negotiated payment terms rather than trial.
Frequently asked questions
Can I get out of a personal guarantee just because I didn't expect it to be called?
Not on that basis alone. A guarantee is generally enforceable according to its terms once properly signed, regardless of whether the guarantor expected it to actually be relied upon. Genuine legal defences require more than regret about signing it.
What if the guarantee was never actually put in writing?
This matters. Ontario's Statute of Frauds generally requires guarantees to be evidenced in writing and signed to be enforceable, so a purely verbal guarantee faces a real enforceability problem — though the underlying debt might still be pursued against the original borrower directly.
Does it matter if the business itself has already gone bankrupt?
The borrower's bankruptcy or insolvency doesn't automatically release a guarantor — guarantees are typically designed to protect the creditor precisely in that scenario. This is one of the core reasons lenders require personal guarantees in the first place.
Should I try to negotiate directly with the creditor before getting a lawyer?
Be cautious. Anything you say to the creditor, including partial acknowledgments of the debt, can affect your legal position later. It's generally safer to get legal advice first, even if you ultimately want to negotiate a resolution.
This is a litigation question
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