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ARTICLE · 07 JULY 2023

Enforceability Of Personal Guarantees

Herrington Carmichael LLP
Herrington Carmichael LLP
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Herrington Carmichael LLP

Herrington Carmichael LLP

The origins of the practice can be traced back over 180 years in Wokingham and 150 in Aldershot. It...

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A personal guarantee is a legally binding obligation on an individual to repay a third party's debt or borrowing. Effectively, if a company or primary debtor does not pay or is unable...

United KingdomFinance and Banking
Annabelle Randell
Annabelle Randell
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Personal Guarantees

A personal guarantee is a legally binding obligation on an individual to repay a third party's debt or borrowing. Effectively, if a company or primary debtor does not pay or is unable to pay a debt, then a creditor, for example a lender will become entitled to pursue an individual guarantor for repayment of the debt through the courts. This could even lead to personal insolvency if the guarantor is unable to pay.

Personal guarantees are a common feature of many financial products including business, loans, overdraft, and credit cards. The most common is a director's guarantee whereby a director of a limited company will personally guarantee the repayment of a loan made to his or her company.

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