I started a business 2 years ago with 3 other partners and we secured an SBA loan through a local bank. It was a fairly small loan of $200,000 where each parter (25% ownership each) had to secure a life insurance policy of $50,000 each to cover the loan in the event of a death or other unforeseen circumstances of a partner that would cover a percentage of the loan owed. Two of the partners also put up their personal residences as collateral on the loan. Two of the partners decided they wanted to be bought out by the other two parters who planned on continuing on with the business as equal partners. Legal documents were drawn up to release the two partners from the partnership. One of the partners that put up their house as collateral is no longer a partner anymore. The existing partners were to immediately seek means of restructuring the loan in order to get the partner that is no longer a associated with the business released as a guarantor (supported by the life insurance policy) and the collateral released as well. The legal document that was drawn up to release both partners from the partnership (but this only applies to one of the ex-partners) states the following: "the LLC with use all reasonable efforts to have (name not mentioned) removed as guarantor on any and all loans from Ameris Bank to the LLC and will use all reasonable efforts to have any and all loans to the LLC for which (named not mentioned) has put up any collateral be restructured so that neither she nor her property are subject to any loans on behalf of the LLC, and agrees to hold (name not mentioned) harmless and indemnify her against any loss sustained as a result of any event of a default on said loan by the LLC after the date of the execution of this agreement." Per this section of the agreement, I feel that all reasonable efforts have not been made to restructure the loan in order to remove the ex-partner and her collateral from this outstanding loan. Does this partner have a legal right to go after the existing owners because they have not upheld their part of the legal agreement? It has been almost 7 months since the papers were signed. That's well enough time to resolve this issue. The other question I have is about the loan being in default. Part of the SBA/Bank's agreement is that the loan be guaranteed by each partner's assignment of a $50,000 life insurance policy. One of the ex-parthers has let the life insurance policy lapse because they are no longer a partner and don't have the need for the $50,000 policy. The bank sent an email to the existing partners letting them know that the ex-partner has let his policy lapse and stated that they he needs to reinstate the policy. The ex-partner has no intention of reinstating that policy being that legally they are not a partner anymore. So being this is the case, is this loan in default? If so what would the next steps be with the bank and the existing owners in regards to the loan being in default. And what are my rights?