In this case study, we examine a situation involving a personal guarantee claim in the farming community.
Case Background:
Mr and Mrs P secured a long-term tenancy on a council-owned dairy farm in 2016. To set up and run the farm they took out a business loan for £175,000. As a condition of the loan, the bank required both Mr and Mrs P to sign a personal guarantee, making them personally liable for the debt if their business failed to repay the loan.
Unfortunately, despite Mr and Mrs P’s best efforts, the farm did not yield the expected results, and the business began to struggle financially. Several reasons for this were outside the control of Mr and Mrs P. The 2020/2021 Covid pandemic was the final blow for the farm and as a result, the business was eventually unable to make the required loan payments, eventually defaulting on the loan.
Claim:
In light of the default, the bank decided to enforce the personal guarantee signed by Mr and Mrs P. The bank initiated legal proceedings against them to recover the outstanding debt.
Legal Proceedings:
After numerous demands for repayment went unanswered the bank issued a statutory demand against Mr and Mrs P and bankruptcy was threatened. Although they had willingly signed the personal guarantee in the first place, Mr and Mrs P admitted they had given little thought to a potential scenario where they would need to pay the loan back personally and had very little means with which to do so.
Faced with the daunting prospect of repaying the entire debt plus accrued interest, Mrs P researched personal guarantee help online and found Personal Guarantees UK, a consultancy specialising in personal guarantee matters. During their free initial consultation with Andrew Read they gained an understanding of their position and the potential consequences of the legal action against them. They decided to proceed with our services.
What we did:
Recognising the urgency of the situation, Personal Guarantees UK swiftly initiated negotiations with the bank on our clients behalf. We carried out an in-depth review of Mr and Mrs P’s assets, income and liabilities which we then presented to the bank’s representatives demonstrating that they would achieve little to nothing if they went ahead with bankrupting our clients.
In addition to this, we put together a proposal that offered twelve monthly payments to achieve a full and final settlement figure which whilst being less than a quarter of what was owed, was more than what the bank would achieve through legal action. The first offer was rejected and after some discussion with the clients, we reoffered the same amount but as a one-off immediate lump sum payment which was accepted.
Conclusion:
This case highlights the importance of understanding the implications of signing a personal guarantee. Business owners should carefully evaluate the risks and seek advice before agreeing to such obligations. It also highlights how seeking professional help to negotiate a claim against you can lead to a far more favourable outcome than trying to handle it alone.
Quote from Mrs P: “I really don’t know what we would have done if we hadn’t found Personal Guarantees UK. It seemed like there was no way out apart from being made bankrupt which would have made our lives even harder. It was a terrible time but now it is all behind us. We don’t have the farm anymore but that’s been a blessing in disguise, my husband was offered a great job with accommodation for us and I have started a new business that is less vulnerable to unforeseen circumstances. We have been able to move forward with all of our other plans including starting a family later this year. A really big thank you to everyone at Personal Guarantees UK because it wasn’t just the actual work you did for us, it was the support you gave us at a time when we had nowhere else to turn. There are lots of farmers in the same situation as we were thanks to milk prices and covid and we recommend you to anyone we know who needs your help.”
