Guarantors: Enforcing guarantees is not guaranteed: Take it slow, consider your options

If you have guaranteed the debts of a person or entity that is in financial distress, you should take legal advice as soon as possible. Whatever you do, do not panic and make a rash decision such as declaring bankruptcy, winding up your business or selling your family home. The creditor seeking to enforce the guarantee may be more amenable to compromise than you think, particularly given the risks that creditors often face when they seek to enforce guarantees.

First, there is the legal principle that guarantees are to be interpreted strictly and any ambiguity or doubt is to be determined in favour of the guarantor. This means that if the guarantee is sought to be enforced, it may not result in you, as the guarantor, being ordered to pay the whole of the guaranteed debt unless that is the clear and unequivocal effect of the guarantee.