Understand your company's position and learn more about the options available
What happens to a Personal Guarantee in bankruptcy?
- Close Company With Debts
- No.1 For Liquidations
- Stop HMRC / Creditor Pressure
- 25,000+ Directors Helped
- Immediate Advice Available
- Insolvency Practitioners
Are personal guarantees enforceable if you have been declared bankrupt?
Personal guarantees encourage banks and other lenders to agree business loans, as their risk of losing money is reduced. If default occurs by the company concerned, the lender has one or more directors who can be pursued for payment.
A secondary liability is created when a personal guarantee is provided, and as a result directors may face legal action by the lender to recover the debt, which in some instances could lead to bankruptcy if they’re unable to pay.
Take Our Free 60 Second Test
Get an instant understanding of your:
- Debt and Asset Position
- Formal Insolvency Options
- Next steps
Plus much more ...Start The 60 Second Test
Lenders are able to enforce personal guarantees, as they’re legal documents that make the provider personally liable for some or the entire outstanding loan amounts. If more than one director has provided a personal guarantee, the lender is more likely to target the director they believe is most financially able to repay.
This means that if you have significant personal savings or own high value assets such as property, you may be more of a target for lenders and could face the prospect of having to enter bankruptcy.
This is why it’s essential to seek professional guidance prior to signing a personal guarantee for business lending.
Is your company insolvent?
If your company is insolvent you have a number of legal responsibilities that you must adhere to. Taking steps to protect creditors from further losses by contacting a licensed insolvency practitioner can help ensure you adhere to these duties.
The team are available now - 0800 644 6080
You need to owe £5,000 or more before a creditor can make you bankrupt, but the debt also has to be proven to the court. The lender can achieve this by obtaining a County Court Judgment (CCJ) against you, or sending a 21-day statutory demand for payment.
In this case, if the money isn’t paid in 21 days the debt is proven to exist and the lender can petition for your bankruptcy.
Can’t pay CBILS or Bounce Back Loan?
Don't worry - there are thousands of other company directors in the same position. If you are struggling to keep up with your Covid loan repayments, speak to a member of the Real Business Rescue team to discuss your options. It's Free & Confidential.
The team are available now - 0800 644 6080
Entering bankruptcy means control of your personal assets is transferred to the appointed Trustee. In making you bankrupt, the lender is hoping to recover at least some of their money from the sale of these assets, which will include your home if the amount of equity makes a sale worthwhile.
Essentially, bankruptcy is a last resort for all parties but it does rid you of your debts, including those arising from personal guarantees, and once the bankruptcy has ended creditors have no right to pursue you for their money.
Discharge from bankruptcy typically takes 12 months, but if you’re able to contribute more to creditor returns from your monthly income, an Income Payments Agreement (IPA) could be set up, which will last for a further two years.
If you inherit money or property during the course of a bankruptcy, this also passes to the Trustee and becomes available to add to creditor returns.
Need to speak to someone?
If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
Call our team today on 0800 644 6080
Providing personal guarantees enables a company to access vital funding, but the associated drawbacks for directors are ever-present. There are ways you can reduce the potential ramifications of providing personal guarantees, however, and mitigate the risk of bankruptcy.
- Understanding how personal guarantees work before you sign, and how yours in particular could affect your personal finances
- Seeking guidance from a professional adviser on the value of signing a personal guarantee before you sign it, to ensure you fully understand the risks, including how and when you could become personally liable if your company cannot pay
- Taking out personal guarantee insurance
For more information on what happens to personal guarantees in bankruptcy, and how you can protect yourself, please contact our experts at Real Business Rescue. We can offer you a free same-day consultation at any of our network of offices nationwide.
Further Reading on What happens to a Personal Guarantee after bankruptcy?
Real Business Rescue are here to help
Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.
- UK’s Largest Liquidators
- 100+ Offices Nationwide
- 100% Confidential Advice
- Supported 25,000+ Directors
Looking for immediate support?
Complete the below to get in touch
We provide free confidential advice with absolutely no obligation.
Our expert and non-judgemental team are ready to assist directors and stakeholders today.