HELP! Personal guarantee obligations not affected by bankrupcy?

[korovka]

Hi,

I am a director of a company that got in trouble with the secured lender who has now placed us into administration, and the administrator within 3 minutes of arrival went straight into selling the assets (real estate).

Both myself and my spouse signed a personal guarantee document that states:

 

You agree that none of your liabilities underthis Guarantee shall be reduced or affected by:

the death, insolvency,bankruptcy, liquidation, administration, winding-up, incapacity, limitation ordisability of the Borrower and/or any other person

 

Does it mean that even our personal bankrupcies will not remove these liabilities, and we will in effect be lifelong slaves of our creditor? The creditor is not a bank but a small private company.

We cannot afford any more legal fees at this stage, and this seems to be a specialist area.

[tifo]

Does it mean that even our personal bankrupcies will not remove these liabilities, and we will in effect be lifelong slaves of our creditor?

 

This is what it says "You agree that none of your liabilities underthis Guarantee shall be reduced or affected by ..... bankruptcy ..... of the Borrower."

 

If you didn't agree to it, why did you sign it?

[numbers666]

Hi,

 

If you are declared bankrupt as individuals,the insolvency practitioner will deal with this alleged 'life term of debt'.

 

Under law you are released for all debts once discharged. No contract can over ride statute law!!!

 

 

Unfair Terms - Regulation by statute - Unfair Contract Terms Act 1977

 

 

In addition to the protection offered by the common law, there exists statutory protection from unfair terms in the form of the Unfair Contracts Terms Act 1977

 

From http://www.bis.gov.uk/insolvency/personal-insolvency/bankruptcy-what-is-bankruptcy

 

Will all my debts be included in my bankruptcy?

Certain debts cannot be included in your bankruptcy, these are:

 

any fine under the Magistrates’ Courts Act 1980;

any obligation under an order made in family proceedings or under a maintenance assessment made under the Child Support Act 1991 (except an obligation to pay a lump sum or to pay costs);

any obligation under a confiscation order made under the Drug Trafficking Offences Act 1986, section 71 of the Criminal Justice Act 1988 or under Parts 2, 3 or 4 of the Proceeds of Crime Act 2002; or

a debt to the Student Loans Company for loans under the Education (Student Loans) Act 1990 or The Education (Student Support) Regulations 1998.

This means that you will still have to carry on paying these debts and will not be released from them when you are discharged.

 

 

These are the ONLY exempt debts.

 

Have a nice weekend

 

N

Edited January 28, 2012 by numbers666
Added Stat for Clarity

[korovka]

Many thanks, Numbers! I thought this clause cannot be right - the trouble is that when we were signing the agreement, the solicitors were not at all worried about this clause and said it is a standard one that all banks use! Our secured lender is not a bank but they used solicitors who draft bank contracts routinely.

 

It has not come to this point yet - they have not even started selling the assets, and until yesterday we were lead to believe that we were working out a solution with them. It may well head that way at this point, especially given the state of property market.

[korovka]

Tifo,

We were advised by our solicitors at the time that this is a standard contract clause for a personal guarantee used by all banks. Nobody provides any business credit without personal guarantees.

[Gaston Grimsdyke]

The clause is right, and so is your solicitor. The clause says your liability is unaffected by the bankruptcy/insolvency of the "borrower or any other person". You aren't the borrower, you are the guarantor - the borrower is the company. Nor are you "another person", you are yourself. What the clause really means is that if the company goes into liquidation, or a co-guarantor goes bankrupt, you remain liable (which is fair enough). It does not attempt to - nor could it - keep you liable outside of your own bankruptcy, so any liability will go into your bankruptcy.

[numbers666]

Hi Korovka,

 

As Gaston alludes to in #6, whilst you are held liable due to the PG, this would be included in any bankruptcy you are in as an individual ie the debt would die on discharge.

 

Correct in saying it a standard PG clause, but the OP desired clarification on the debt living after personal bankruptcy... I was clarifying under stat law that this is not possible (yet )

 

N

[korovka]

Thank you, Gaston, for pointing this out - this is brilliant. Indeed, on the front page it states: "Borrower" and the company name.

 

Not a nice topic for a Saturday night but as we are evaluating our worst case scenarios, this is a great relief.

 

And thank you so much Numbers - I have some clarity in my head now about this.