Personal Guarantees: What Assets Are At Risk?

Article Summary

If you sign a personal guarantee for your company, you can become personally liable for business debts even though the company is a separate legal entity. A personal guarantee creates a separate contractual obligation allowing a lender, supplier, landlord, financier, or other creditor to pursue you personally if the company defaults.

Depending on the guarantee and any supporting security, creditors may be able to pursue bank accounts, investments, vehicles, real property, and, in some circumstances, the family home. Where substantial debts remain unpaid, personal bankruptcy may also become a risk.

A personal guarantee does not automatically mean you will lose your assets. Creditors must generally enforce the guarantee in accordance with its terms and applicable law, and there may be circumstances in which enforcement can be challenged. However, Australian courts generally enforce properly executed commercial guarantees, making it essential to understand the legal