Is Your Personal Guarantee Enforceable?

There are processes and rules that lenders need to follow when a director signs a personal guarantee, these include factors such as; independent legal advice and making sure there is no conflict of interest. It is very rare that you will question these until payments are missed and a guarantor is asked to repay a debt. It is usually at this point that the question “Is my personal guarantee valid?” gets asked.

Unfortunately, in most cases the answer is yes, your guarantee is valid and, you are liable for the debt. If you are under the impression that your guarantee is not valid, you need to be realistic about your situation.

“How do I know if my guarantee is valid?”

There are certain rules that lenders need to follow when they ask you to sign a personal guarantee on a loan. It should be mentioned that not adhering to one of these rules will not automatically secure a write-off for you. Some of these rules include:

• Ensuring signatures are legitimate and witnessed
• Was the guarantor fully aware and able to make decisions?
• Was the guarantor forced to sign?
• If co-signed with a family member, was there access to independent legal advice
• If the guarantee was fraudulent or the guarantor was significantly misled

The problem with these factors is that most can will apply in one way or another to the signing of a guarantee. This often gives a false impression that your personal guarantee is not enforceable. However, it is extremely difficult to prove any of the above have occurred. Large lenders often require PGs on loans therefore they know how to create a binding agreement that is hard to find loopholes in.

Despite this, there are instances in which you can prove your guarantee is not valid. We have disproven countless claims where signatures have been forged, lenders have lied to directors or guarantors have been forced to sign.

To prove this, there is a lot of work required and mountains of evidence and experience in insolvency law. That is why it is important to consult personal guarantee experts before taking any action.