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What legal action could I face if the Personal Guarantee is enforced?

There are two main legal routes a Personal Guarantee creditor may take. The first is bankruptcy if your liability is over £5,000. Or alternatively, they may seek to obtain a charge on an asset like the family home with the possibility of obtaining a forced sale order from the court.

Bankruptcy is normally the least favoured option because the outcome to creditors is uncertain. Any recoveries into the bankruptcy estate must be split equally to all creditors after trustee fees. This results in sharing assets and usually results in lower recoveries for creditors. However, the process of bankruptcy involves the issuing of a statutory demand which can be done quite cheaply by creditors with an agent of the court serving the demand on you personally. The shock of someone knocking at your door normally has the desired effect of bringing Personal Guarantors to the negotiating table.

The alternative to bankruptcy is to obtain a charge on a property asset. This normally involves the family home if no other property assets are held. The charge can only be achieved against the equity held by the Personal Guarantor and not against any other parties who may have an interest in the property. The process involves obtaining a County Court Judgement and then going to court to achieve a charge. Unfortunately, the County Court Judgement impacts the Personal Guarantor’s credit file and if the property is not voluntarily sold the creditor could go on to get a forced sale order.

Personal Guarantees UK have been assisting directors to avoid legal action for over ten years. With the team’s overall experience spanning 40 years of corporate and personal insolvency, any Company Director referred to us will be in safe hands.

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