Personal guarantees of loans
There is a relatively new kind of financial loan although made payable directly to the child or family member or even a friend or business associate, it is subject to a guarantee from the parent or parents or some other person. If payment is not fully made or instalments are missed the guarantor becomes liable for the payment and if talking about cars or houses this can be a considerable amount.
These institutions offering these loans supported by personal guarantee often make light that ‘you are only signing a guarantee’ and you are only liable if payments are not made. However, if the couple split up there could be substantial amounts owed.
We have had people who have been misled into signing such guarantees that we have assisted them in proving the guarantee was entered into without following the requirements.
These are specific legal requirements which if not properly carried out the guarantee may prove to be invalid. Such requirements concern where there is a relationship of trust between the debtor (borrower)and the guarantor there may be a requirement for the person signing the guarantee to receive INDEPENDENT legal advice as to the potential liabilities of that guarantee. Such a relationship can involve ex partners, friends, business associates and family members
Furthermore the bank or institution making the loan must show that it has carried out proper credit worthiness cheques on the debtor (borrower) and the guarantor failing which the guarantee may be invalid particularly if the debtor (borrower) defaults on the payment.
This is a very complicated area of law and if you have signed any guarantee for someone taking out a loan whether they have failed to repay it or not contact us for a free assessment of your position.