How to Negotiate and Settle Outstanding Personal Guarantees

Many people run their business through a limited company, so they are protected by the veil of limited liability, however more and more often, directors find themselves exposed following the insolvency of their company.

Prior to the credit crunch, it was not uncommon for banks to provide loans and overdrafts up to £25,000 and sometimes more, without requiring a Personal Guarantee (PG) from the directors however that has changed, and it is rare to see any borrowing over £5,000 without a PG.

PG's are not just requested by banks and other lending institutions. Landlords will often require a PG and nowadays so do many suppliers offering terms, particularly in the construction industry.

If a director is unfortunate enough to have to fold their company and then have to deal with the personal fall out of the company’s insolvency, in the form of PG’s, it is paramount they seek advice and assistance at the earliest possible stage.

There are several ways of addressing PG’s. Although few and far between, the beneficiary of the guarantee, e.g. a bank, may not be able to produce the PG or it may have been drawn up or executed incorrectly rendering it unenforceable. If the guarantee is valid then how it is dealt with will be determined by the guarantor’s personal circumstances. Things that will be taken into account will be whether they own property or other assets of significant value; whether they have other debts; whether they have a disposable income on a monthly basis; and the size of the debt amongst others.

An experienced insolvency consultant will be able to advise and assist the guarantor once all of the facts are clear, and they could help you with one of the following:

• Negotiating repayment terms
• Full and final settlement
• Bankruptcy
• IVA