Does the size of your personal guarantee mean you need to go bankrupt
We are getting an increasing number of calls from company directors and sole traders who are telling us that with the collapse of their business they are finding that Personal Guarantees (PG's) that they gave many years ago in the good times are now being called in.
It became standard practice for banks and suppliers to ask for personal guarantees when opening up an account and seeking credit. Of course when starting out a business it is never envisaged that the account will be called in as it is not considered that the business would fail. It therefore sometimes comes as a shock when many years later you get a letter from the PG holder asking for the account to be settled personally.
We have just advised an individual who has been provided with a PG that he gave to a trade supplier many years before. The PG is enforceable and the individual had to decide if he could ever make repayment of the 100,000 now due. He decided that he couldn't. They were by far his biggest creditor and would control an IVA. He also decided that in any event, the IVA was too speculative. He decided that he couldn't forsee how the next few years would go and so to contract to pay a large sum of money each month in the IVA couldn't be justified.
With our help he elected to go bankrupt. We filled in his paperwork for him consisting of a petition and a statement of affairs. We booked his court and attended with him. He was made bankrupt and his affairs fell to be dealt with by the Official Receiver. As he has little by the way of assets and no real disposable income, it is possible that he may qualify for an early discharge. After his initial interview, he has not heard from the OR again and they have confirmed that the next time they write to him, will be to tell him about his discharge from bankruptcy.
He has dealt with his 100,000 PG via the bankruptcy route. It is possible to also deal with a PG via an IVA if you have disposable income that you believe will be available for 60 months, or indeed by a payment plan for a smaller PG.
It became standard practice for banks and suppliers to ask for personal guarantees when opening up an account and seeking credit. Of course when starting out a business it is never envisaged that the account will be called in as it is not considered that the business would fail. It therefore sometimes comes as a shock when many years later you get a letter from the PG holder asking for the account to be settled personally.
We have just advised an individual who has been provided with a PG that he gave to a trade supplier many years before. The PG is enforceable and the individual had to decide if he could ever make repayment of the 100,000 now due. He decided that he couldn't. They were by far his biggest creditor and would control an IVA. He also decided that in any event, the IVA was too speculative. He decided that he couldn't forsee how the next few years would go and so to contract to pay a large sum of money each month in the IVA couldn't be justified.
With our help he elected to go bankrupt. We filled in his paperwork for him consisting of a petition and a statement of affairs. We booked his court and attended with him. He was made bankrupt and his affairs fell to be dealt with by the Official Receiver. As he has little by the way of assets and no real disposable income, it is possible that he may qualify for an early discharge. After his initial interview, he has not heard from the OR again and they have confirmed that the next time they write to him, will be to tell him about his discharge from bankruptcy.
He has dealt with his 100,000 PG via the bankruptcy route. It is possible to also deal with a PG via an IVA if you have disposable income that you believe will be available for 60 months, or indeed by a payment plan for a smaller PG.
