Monday, 4 February 2013
Personal guarantees in liquidation situations
We do sometimes get asked whether personal guarantees can be voided if the business becomes insolvent or goes into liquidation. Unfortunately, this is not the case as it is well...personal. As such, has nothing to do with the company. It is obvious when you think about it. Leases on shops are quite often backed up with personal guarantees as are company bank accounts or hire purchase agreements
Only bankruptcy can stop you having to pay out on a personal guarantee. Otherwise it is best that you pay it or you may be able to come to some sort of agreement.
One should also be mindful that if you start to pay back a debt that has a personal guarantee at the expense of other creditors it could be perceived as creating a preference - i.e. making one creditor better off than another.
Please see our page on Personal Guarantee in Insolvency