Personal guarantees if your company fails
A personal guarantee is a promise by a director, given to a lender, landlord or supplier, to repay a company debt personally if the company cannot. While the company is trading the guarantee usually lies dormant, but if the company fails and the debt is unpaid, the creditor can pursue you personally for the guaranteed amount, which can put personal assets at risk. Your home is at risk directly if it was used as security, and an unsecured guarantee can still reach it through a court charging order or bankruptcy. Insolvency Service; UK Finance guidance
- What it is
- Your personal promise to repay a company debt if it cannot
- Common with
- Banks, asset finance, landlords, some suppliers
- The risk
- Personal liability if the company fails, including your home through security, a charging order or bankruptcy
- First step
- Find every guarantee and total your real exposure
Talk it through, free and confidential No obligation. We review your situation and point you to the right next step.
Total your exposure first
Banks, asset finance providers, commercial landlords and some trade suppliers commonly require guarantees, and directors routinely underestimate how much they have personally guaranteed across loans, leases and supplier accounts. The first step if your company is in difficulty is to find every guarantee you have signed and work out the total. Our personal guarantee exposure checker helps you add it up. Once a company enters a formal process, guaranteed amounts can often be negotiated, so don't assume the headline figure is what you'll pay. A practitioner or specialist adviser can help you deal with guarantees as part of the wider plan rather than in a panic.
Are there personal guarantee loopholes?
Search for personal guarantee loopholes and you will find plenty of promises; the honest answer is that there is no magic escape, but there are real, recognised challenges worth checking before you pay. None of these is a loophole so much as a flaw in how the guarantee was given or applied.
- The guarantee was not properly executed, or you signed in the wrong capacity
- The lender materially changed the underlying deal, for example increasing the facility or extending terms, without your consent
- You were pressured into signing without the chance to take advice
- The debt claimed exceeds a cap written into the guarantee, or a missed expiry/release clause applies
Once you know what you have signed, get the actual signed guarantee reviewed by a specialist before conceding the claim, and negotiate rather than ignore it. Our personal guarantee settlement model sets an offer against what the creditor would net by making you bankrupt instead.
When a guarantee is actually called, and what happens first
A guarantee is not usually called the moment a payment is missed. Lenders typically pursue the company first, then formally demand from the guarantor once the company's position is clear, which in practice often means after an insolvency procedure begins. The demand normally sets a short period to pay before enforcement, and enforcement against an individual can include a statutory demand and bankruptcy proceedings, or a charging order where property is involved. Two things are worth establishing early rather than at the point of demand: whether the guarantee is capped or unlimited and whether it extends to interest and costs, and whether it is joint and several with other directors, because a lender can pursue any one guarantor for the whole amount and leave them to recover contributions from the others. Take advice on the wording before assuming the exposure, since guarantees vary far more than the headline suggests.
How this plays out depends on the procedure the company enters. Our personal guarantee enforcement matrix compares a CVL, an administration and a CVA row by row, and sets out every route by which a guarantee creditor can reach your home.
Worried about your own credit file? The company's insolvency does not appear on it automatically, but a called guarantee can. See does company insolvency affect my credit rating?
Where to go from here
- If you decide to speak to a Licensed Insolvency Practitioner, choose your own: our practitioner directory lists every practitioner on the official Insolvency Service register, and how to choose an insolvency practitioner explains what to ask. Always confirm their entry on the official register before you instruct anyone.
Common questions
Will I have to pay a personal guarantee if my company is liquidated?
If the guaranteed debt is unpaid after liquidation, the creditor can pursue you personally. But the amount is often negotiable, and there may be defences, so take advice before agreeing to pay.
Can I lose my home over a personal guarantee?
Directly, only if your home was used as security for the guarantee. Many guarantees are unsecured, but an unsecured one can still reach your home: the lender must first get a court judgment against you and can then ask for a charging order, and if you owe £5,000 or more it can apply to make you bankrupt (Insolvency Act 1986, s267), after which the trustee may sell the home depending on the equity in it. See our personal guarantees and your home table. Check exactly what you signed and take advice.