In one sentence
A provision converting a non-recourse loan into a recourse obligation upon specified triggering events.
The longer version
Springing recourse is the enforcement edge of a carve-out guaranty: on defined bad acts, typically bankruptcy filings or prohibited transfers, personal liability springs into existence for the full loan.
Courts have enforced these clauses as written, sometimes harshly, which is why the triggers are negotiated as carefully as any financial term.
Common questions
- What is springing recourse?
- A provision that converts a non-recourse loan into a recourse obligation if specified events occur, such as a voluntary bankruptcy filing or an unpermitted transfer.
- What events usually trigger springing recourse?
- Most commonly a voluntary bankruptcy, collusion in an involuntary filing, an unpermitted transfer or encumbrance, and violations of single-purpose entity covenants.
- Why is springing recourse so severe?
- Because it exposes the guarantor to the full debt for acts the lender most wants to deter, especially a bankruptcy filing that delays the lender's remedies.
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