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I don't know were else to post this question even though it is not a tax question, so here goes.

A, B & C start a business XYZ and borrow money from the bank to do so. XYZ is the borrower. In addition A & B grant security interests (mortgages in this case) in other valuable property that they own personally. Lastly, A, B & C also sign as joint & several co-guarantors on the loan.

XYZ goes belly-up & defaults the loan. Needless-to-say, the bank is going to get paid; but in what sequence? Is the bank required to execute, e.g. foreclose on the security interests first in order to satisfy the loan balance or may the bank skip past the loan security and go directly at the co-guarantors first for payment; in this case C because he is the deep pocket; therefore leaving C paying the whole loan but with a contributory claim against A & B?


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