Moreover, the guarantor to such a transaction is often an individual, as opposed to an entity, which can raise unique challenges and risks to the lender. One such concern is what happens to a guaranty obligation when an individual guarantor dies before the obligation has been repaid.

Under traditional contract law, the death of a party might render a contract legally “impossible” and void that contract’s enforceability. However, the law has carved out various exceptions to protect the parties to a contract and most loans are likely to keep parties “on the hook” for their financial obligations—even after death.