If they decide to sue, could they try to get money from my husband as I have nothing?
Sorry, I don't know the answer to your question. All I can say is that it sounds important enough to be worth paying a good local business attorney for a consultation. Bring your lease and the personal guarantee to show the lawyer.
We have about $10000 in equiptment in place- do I auction it off or leave it for the landlord?
I recommend selling the equipment yourself unless (1) its removal from the premises would greatly reduce the price anyone would pay for it and/or (2) you do decide to file personal bankruptcy.