Is Your Personal Guarantee Valid?
Nobody wants to be held accountable for a Personal Guarantee when it is called upon, typically after a company fails, and many people look for ways to ‘squirm out’ of their commitment/exposure.
However, realism is vital. The basic premise of a Personal Guarantee is that as a businessman or woman, working in a commercial environment, decided to take a line of credit (in whatever form), and a creditor required a Personal Guarantee– so you’re in!
Very often people look to Google to provide a way out, but that’s like checking health symptoms online. Looking for whatever suits your argument, will not resolve the issue.
Personal Guarantees are a difficult area to navigate and indeed creditors must be diligent in the provision and preparation of a Personal Guarantee – as it’s their security.
Very often people look for excuses such as ‘I didn’t get professional advice.’ It’s an argument but it will not win a case as mentioned in the basic premise above. Others include, ‘the Bank Manager is a friend and said they would never call on the Personal Guarantee’ or the general one of ‘I didn’t know what I was signing’…..harsh – but ignorance is not a defence.
Things to look out for that may assist in eradicating a PG include:
- Availability of the original Personal Guarantee document,
- Signature issues (polite phrase!),
- Make sure the Guarantor is lucid and aware,
- The use of Joint and Several Guarantees with family members (very often wife/ husband) under the Etridge legal principle, and
- Who actually worked for the creditor on the Personal Guarantee.