# Personal Guarantee on a Business Loan - now in liquidation



## robbie1 (7 Nov 2012)

We were a small family run business, now in liquidation, since mid 2012, due to a number of factors. Only 2 directors, husband and wife (still together!) but bank now looking to call on personal guarantees. Bank borrowings, including OD, company loan and company Credit Cards total c. 150K. 
Liquidation process not yet complete there may be some funds available to unsecured creditors after liquidator and revenue cleared (no employee liabilities) but this I know will be negligible.
Can we stall the bank until liquidation actually closed out in c. 6 months (according to the liquidator) or are we obliged to engage with them now?
We have advised them that we have currently very limited income and are struggling to meet our day to day family expenses (4 children) with only one of us working full time and myself only part-time.
The bank also has security of some land value of which is no where close to amount outstanding, _shortfall of c. 120K_, only good as agricultural land now, no prospect of developing on the site.
In all our years of doing business with the bank the company has paid in excess of 50K in fees and charges, do they ever take this into consideration. We did not draw huge salaries from the company, each taking home less then 25K/ea per annum, at the peak of our business we employed 10 people. Last year of business we took home 15K/ea, enough to keep food on the table, while we struggled to keep the business afloat.
We have been asked to complete a statement of affairs; we need to convey that we as individuals really have nothing more to give. All our savings were invested back into the business as well as 12 years of our lives…
I see a lot of discussion around mortgage debt and I appreciate that we are not at risk of losing our house, not linked into business finance at all, but we do want to move on from the skeletons of a failed business that at one stage was thriving.
How can we best deal with the personal guarantee noose?


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## Bronte (8 Nov 2012)

Robbie welcome to AAM.  Unfortunately I don't have good news for you.  As you've stated, you've given a personal guarantee so that means your company status will not give you the limited liability.  

No the 50K in fees is completely irrelevant as is the fact that you've been good customers and that you've withdrawn low salaries etc.  The bank is a business and they are obliged to get as much back as they can.  

If your not a stong person don't read any further.

You say you know your home is not at risk, I wouldn't be so sure because of the personal guarantee.  Is there equity in it?  How much is the land worth

How much debt - to the bank only - will there be after the liquidation ?  I presume all other debt is unsecured and you are not personally liable ?

In relation to filling out the statement of means, people often forget to put in a lot of things, please check out the Mabs website as they have a template.  

You're going through the most difficult phase right now, the business failure and the loss of employees.  So it's important for you to be strong, particularly if your husband is having an even more difficult time than you.  It's important that you realise that this can cause an enormous strain on the relationship.  Don't underestimate this and try not to put pressure on each other and most of all don't blame each other.  My heart goes out to you.  Talk to each other and support each other and reach out to family.


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## robbie1 (8 Nov 2012)

Thank you Bronte for your informative reply. MABS website advice will be noted regarding completing Statement of Means.
But you raised the issue of our family home potentially getting dragged into this and this leaves me cold with fear.
Our family home is in positive equity for about 170K based on current market values. We do have a manageable mortgage on it. We part financed our current home through sale of our house in Dublin in the good times! A lot of proceeds from this house sale also found their way into the business. The current equity on this house is the only security we have for our children and their young lives, it cannot be tapped into because of our poor decisions in the business.
I would appreciate very much if someone else has an opinion on whether our family home should be entered into the mix when discussing a personal guarantee, are we going to be expected to sell up and move out? God I hope not…The land is worth c. 25K (if it even would sell)


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## 44brendan (8 Nov 2012)

Being in the banking business I will offer you some advice.
Brontes confirmation to you re the Guarantee is correct. You are fully and personally liable for the amount of the guarantee. From your post it appears that you have no assets or earnings other than some land held as security by the Bank and your family home. In terms of losing the family home, you are not at risk. This would be in the joint names of your wife and yourself and as such cannot be sold by the bank to pay a debt in your sole name. However, the Bank can take out a judgement against you and if successful register this as a mrtgage against your property. This would be a problem in the event of you selling or re-mortgaging the property in the next 12 years.
Talk to the Bank and be open with them on your situation. Offer also to co-operate in selling the land. Best of luck!


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## robbie1 (8 Nov 2012)

Thank you Brendan for taking the time to reply, just to clarify the debt is in the limited company (now liquidated) name, not in our sole names, but the fact that there is a personal guarantee does this automatically transfer the unpaid debt into our sole name? Questions may appear remedial apologies.
Maybe you can clarify is there any merit in stalling the bank for a while longer until a. we get our own finances/lives/heads in order & b. the liquidation process is completely closed out, there may still be a small, negligible amount of money available to the creditors. 
Thank you for your time


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## Bronte (9 Nov 2012)

My understanding is that it is a joint debt and a joint guarantee.  

Robbie please do not avoid engaging with the bank.  Be open and honest with them, it gives you the best chance of keeping the family home.  Maybe they will come to an arrangement on the shortfall.  Maybe they will write it off.

Whatever arrangement you come to with the bank, do not trust anything that is said in a meeting, follow it up in writing.  Be very careful what you sign or agree to.  You can come back on here if the bank does want you to agree to a payment.  They will tell you you are not allowed to discuss with anyone (other than your solicitor of course) but you can post it on here as long as you keep it vague.  

It is better that you deal with the bank and get it sorted so you know how to plan for the future, if you have it hanging over you that is the worst possible outcome.


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## retroper (9 Nov 2012)

Hi Robbie1
Bronte is so right, you need to make an arrangement asap.
I have gone through this exact process, business liquidated bank had personal guarantee. Unfortunately the bank would not talk to me (we made offers that were blanked and they wouldn't meet us?) and got a judgment against me and my partner  and a judgment against my home. This was in 07 and its still not resolved, its a horrible situation.
I only wish I had this advice at the time, it would be ancient history by now instead of the nightmare hanging over me.
Anyhow the very best of luck, just focus on getting this sorted and don't let it drag out.
J.
Also I was completely shocked at how bad the liquidation process is, in fact I think its a bit of a scam. I wouldn't get my hopes up on them actually recovering anything.


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## jenny44 (12 Nov 2012)

Hi Guys,new to this forum.we are in the same situation i believe.My husband is a sole trader with 15 years left on his lease on a commercial property and he owes aib 85k.I believe he is only days away from folding.he is considered taking all his fixtures and fittings from existing property and trying to start again.The mortgage is in both our names.if he does what i have said and we recieve a judgement how long does it last and what are the implications,Thanks in advance,,Jenny


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## robbie1 (7 Dec 2012)

*Statement of Means Query - Bank Standards*

I am returning to this thread having started it and then disappearing! Problem hasn’t gone away..and I am now in the middle of completing a Statement of Means, of all the very helpful respondents who answered my queries if any of you are working in the finance area (44Brendan you mentioned you were) can you please tell me is there a standard formula applied to calculating general living expenses for a family of 2 adults and 4 school going children?
We have been leading a very frugal existence when it come to day to day expenditure on food and clothing so I do not want to sell us short on the food/housekeeping expenses, if that makes sense. Kids live in “hand me downs” from cousins etc. and my husband and I are pretty much wearing the same wardrobe for the past 5 years, very boring.
I am certain there must be a standard calculation that banks use based on CSO figures. I am confident that we are currently below the average figure but what is it and how is it calculated because this is what I want to use?
Do financial institutions have access to see balance on An Post savings accounts?
Thanks to all for your help.


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## Dr.Debt (7 Dec 2012)

Hi Robbie

The Personal Insolvency bill is currently passing through the houses of the 
Oireachtas and is due to be passed into law in the coming months.
It sounds like there might be a solution in this law for you

Under the new law, it is reported that there will be some sort of formula
for calculating the minimum required living expenses for families that are cash-flow insolvent. 

If I was you, I would continue the current process with the bank but dont agree anything about minimum required living expenses for the time being.
Keep that one vague and make a reference to the Personal Insolvency bill if the pressure starts to come on. If the company liquidation is not yet completed, I think its reasonable for you to request that no action is taken until the final Liquidator's report is available.

If you decide to take one of the routes available under the new Insolvency bill, and your circumstances qualify for it, this should get you the best outcome.
If I was acting as your Personal Insolvency Practitioner under the new bill, 
I would most likely steer you in the direction of a Debt Settlement Arrangement or a DSA.

So how would this DSA work ?
Lets say you have total unsecured debt of 150,000 and you have net income of 3500 per month and you have a small piece of land worth 30000.
You also have a family home with 170000 equity and manageable repayments

The Personal Insolvency Practitioner will make a proposal to your creditors and the following is an example

1) The land should be either sold or surrendered to the bank to realise about 30000
2) Your basic living expenses for the month including mortgage repayment is fixed at 2500 and this should be ring fenced.
3) The remaining 1000 per month available would be used to repay the unsecured creditor for five years
4) Any increase in your monthly net income during the five year period 
would be paid at the rate of 50% to your creditors in addition to the 1000pm agreed at the outset
5) Any balance still remaining on the unsecured debt after the five years has elapsed would be written off

So the summary outcome of this would be

Start off with 150,000 unsecured debt
less 30000 realised from land
less 60000 from 60 monthly repayments

At the end of five years the remaining 60000 would be written off.

The benefit of this for you is that :
1) Your situation is known exactly
2) You keep your house
3) You get to write off 60K of the debt after five years.

I hope this helps

Dr.Debt


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## robbie1 (7 Dec 2012)

Thank you so much for a lot of information and guidance in this response, I will take some time to look at it closer, but 1 quick question you refer to unsecured debt with the bank, if we have a personal guarantee with the bank for the amount owed, is this still classed as unsecured or had you not seen that fact in my initial posts? The 2 items of security bank has on our debt is a site, agricultural value c. 25K and our personal guarantee, if you had taken this into account in your very detailed explanation then great all we need is a simple yes, wow you have given it a lot of time already.
Thank you


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## Dr.Debt (7 Dec 2012)

The Personal guarantee is UNSECURED debt unless you allowed the bank to place a 2nd charge/mortgage on your home. I doubt that you did this. It wouldnt have been normal procedure.

The site would be regarded  as SECURED debt however you would need to check which type of security they have. Was it by simple deposit of title deeds or was there actually a charge placed on the title. Your solicitor was probably involved with this so you could ask that from him / her.


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## robbie1 (9 Dec 2012)

Thank you for clarifying. 
Re site bank placed a charge on the title.
Regards


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## robbie1 (22 Jan 2013)

*Liquidator friend or foe?*

Please help us to understand the exact relationship that should exist between us (directors of a limited company, now in liquidation) and the liquidator we appointed to our company, for a fee of c. €9,500. Company turnover for last year < €1,000,000, we have been trading for 10 years as a limited company.
We had lots of meetings, briefings etc. prior to and immediately post liquidation c. 6 months ago, then very little contact for about 3 months and now they are back to us day and night looking for information on items that are c. 6 years old, very stressful, feeling all the pressure coming to bear again that was so great before we decided to liquidate.
Is the liquidator friend or foe? At this present moment in time I feel like they are our foe and looking to trip us up…what they are doing also is highlighting back to us how incredibly inaccurate, inefficient our accountants were for 8 years, is this the norm in the current climate?
Advice please as to how to cope?


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## Bronte (23 Jan 2013)

Just try to keep going Robbie. Would say the liquidator is there to do a job and get as much as they can out of the company. But there is nothing you can do about it now. Just be as honest and truthful as you can and do your best to not let it stress you. At least the process is nearing an end.

Unless you clarify in what way the liquidator says your accountant worked incorrectly it would be impossible to make a comment. 

As the company is in liquidation not sure how it's of much good for you to have this information unless in the future it means you will be better at running a company. 

And it's totally unnecessary for a liquidator to make you feel unconfortable if you've done nothing wrong. Maybe you're just so stressed that you feel like he's the foe when he's just trying to do his job. It's not an easy job being liquidator, they're not the kind of people businesswomen ever want to meet. It doesn't seem professional to have a flurry of activity for 6 months and then nothing for 3 months, but I guess that's not something you can control. All power is with the liquidatior so you just have to learn to accept it.  You've got this far Robbie, 2013 should see an end to this nightmare for you.


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## Josephxavier (18 May 2013)

Firstly I have registered on this board and must say its a great forum, thanks to everybody for their input. I hope I have posted this query in the right place.  I guaranteed a business loan in 2007 which was supplied by a private individual to the company. The company was liquidated in 2010. The Statement of Affairs of the company showed the loan as $120,000  and the company was struck off in 2011, by a volantary creditors process. I only discovered this during last week when i phoned the former liquidator.  I was a Director but not a shareholder in the Company. I raised some cash and purchased the assets and the liquidator paid off some of the creditors but not the secured creditor. Now the secured creditor had commenced proceedings again me for the debt of $120,000, now I dont understand the full process but I have 3 initial questions - i) was there a duty on the liquidator to pay off the secured creditor or come to an arrangement with him ii) can the creditor add interest at a defualt rate of 14% to the debt as stated on the Statement of Affairs is his legal process agains myself, or is the debt the debt of the company at the date it was liquidated (c) is their a legal time limit involved that allows the creditor to sit in wait for 3 years and not commence proceedings-




Bronte said:


> Robbie welcome to AAM. Unfortunately I don't have good news for you. As you've stated, you've given a personal guarantee so that means your company status will not give you the limited liability.
> 
> No the 50K in fees is completely irrelevant as is the fact that you've been good customers and that you've withdrawn low salaries etc. The bank is a business and they are obliged to get as much back as they can.
> 
> ...


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## Josephxavier (18 May 2013)

*Personal Guarantee on a liquidated company loan*

Firstly I have registered on this board and must say its a great forum, thanks to everybody for their input. I hope I have posted this query in the right place. I guaranteed a business loan in 2007 which was supplied by a private individual to the company. The company was liquidated in 2010. The Statement of Affairs of the company showed the loan as $120,000 and the company was struck off in 2011, by a volantary creditors process. I only discovered this during last week when i phoned the former liquidator. I was a Director but not a shareholder in the Company. I raised some cash and purchased the assets and the liquidator paid off some of the creditors but not the secured creditor. Now the secured creditor had commenced proceedings again me for the debt of $120,000, now I dont understand the full process but I have 3 initial questions - i) was there a duty on the liquidator to pay off the secured creditor or come to an arrangement with him ii) can the creditor add interest at a defualt rate of 14% to the debt as stated on the Statement of Affairs is his legal process agains myself, or is the debt the debt of the company at the date it was liquidated (c) is their a legal time limit involved that allows the creditor to sit in wait for 3 years and not commence proceedings-


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## Jim2007 (18 May 2013)

If I understand you correctly, you went guarantor for loan given to someone, who subsequently loaned the money to a company, which went into liquidation.  And since this person was unable to repay the loan, the institution is now coming after you for the amount outstanding, is that it?

Assuming that to be the case, then yes you are the hook for whatever amount remains outstanding, how that amount is calculated I expect depends on what you agreed to when you signed up to it.

What happened in the company does not really matter, since you were guaranteeing the debts of a private individual not the company.  In simple terms what happens in a liquidation is that the secured creditors take over whatever assets they hold security on, say machinery, buildings or whatever and either dispose of them themselves or get the liquidator to do it on their behalf. Assuming the assets to do not cover the debt, they then join the other creditors for a share of the proceeds raised by the liquidator on the disposal of the remaining assets.  However it is unclear to me who the secured credit is that you are referring to and what their role is visa via your guarantee of the loan between the individual you are referring to and the institution that granted them the loan.

For future reference, could you please break you post up into individual paragraphs to make it easier to read thanks...


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