There are several firms that have cropped up within the last few years offering to negotiate or write off your bank or trade personal guarantees. Their fees vary greatly, as in our experience, does their success rate.

Many of our clients have given personal guarantees, either to banks, finance companies, trade accounts, or to support asset purchases.  These personal guarantees ‘crystallise’, or in other words they become payable when they default on their agreements, or enter a formal insolvency, so its important for our clients to know that when we are assisting them, we are looking at all of their debt, including guarantees. So how do we go about this?

How does it work?

First of all, you need a ‘catch all’ plan to deal with the problems within your business – that’s where we can fit in. Robson Scott assesses the current state of your business, and works out with you, the owners, where you personally want to be, and where the business needs to be. We then give you various options that may or may not include a formal insolvency procedure (Liquidation, Administration or Voluntary Arrangement). We assess the effect on your personal position of each option, including any personal guarantees that may crystallise.

Prior to implementing the overall plan, we will ascertain the value of your Personal Guarantees, and have a solicitor review the paperwork for validity, we will then work out the likely time in terms of the overall plan that your personal guarantee will start to be enforced.

Prior to this point, we will review your personal circumstances with you. There are three main routes available, depending on your circumstances and the overall plan for your business.

Firstly, if your plan is based around your existing business moving forward (either as it is, or by a Pre-pack administration or liquidation), then it may be possible to have those creditors/banks with guarantees agree to transfer their debt to the new company, and we could then assist in agreeing new repayment terms with them, or

Secondly, if your business is shutting down, then you we could assist in agreeing that the money due under your personal guarantee be paid off over a period of time, or

Thirdly, if you were able to offer a lump sum (eg. Money from family, a pension or even further finance), in the current market place, the banks are prepared to accept a write off, of the money due to them. In some cases, we have seen banks write off as much as 60% of the debt, when offered a one off lump sum.

With all three of the above options, before deciding whether to accept the offers being put to them, the creditors / banks would expect to see a review of your personal circumstances, which going back to the beginning of this article, is what some firms are offering to do for you.

In our experience, it can be worthwhile employing a firm to act on your behalf to negotiate bringing your personal guarantee to an agreeable conclusion. In the main, it shows you’re not ignoring the problem and are serious about resolving it.

Who to use?

In the first instance, you need to have your overall business financial reviewed, and the Personal Guarantee issue will form an integral part of the plan required to get you to where you need to be. Robson Scott will review your business for free, and at that time review your Personal Guarantees. At the right stage in the overall plan, we will work with one of our business partners to negotiate payment terms of a write off of your Guarantees.

Who should I avoid?

When looking into this I came across quite a few firms either claiming to offer a ‘write off your Personal Guarantee’ service, but charging quite extortionate up front fees, and even higher back end fees based on the % bank write off. These should be avoided. The firms we recommend, charge only a small initial fee based on the number of guarantee, and low success fee, which can be fixed rather than % based, so you know exactly where you are. Your personal guarantees need to be dealt with by building a clear future roadmap of your business and personal finances, presented in a clear, no nonsense fashion. This can be done either by yourself, with us, or by using one of these specialist firms. This then needs to be followed up with good old fashioned negotiation. This is the best way to get the banks to look seriously and favourably at your proposals.

What if I also have more personal debt?

If your circumstances are such that you couldn’t reasonably make any kind of material offer, nor pay it on a monthly basis, then we would look to see whether Bankruptcy or an Individual Voluntary Arrangement might assist. In both these scenarios, your personal guarantees are treated the same as all other unsecured debts, namely written off in bankruptcy and included within an IVA.

Robson Scott can assist with both of these more extreme solutions.

Directors’ Responsibilities

As a director you have a legal responsibility to your company and its stakeholders. However, we appreciate that you also have a responsibility to yourself and your family. In advising on Personal Guarantees, we aim to give you piece of mind in moving forward through a difficult time.

Examples of recent wins?

Within last few months, some of our successes include:

A husband and wife based in Newcastle-upon-Tyne who were directors of a company that we assisted them in liquidating. They had personally guaranteed the company overdraft, which crystalised upon liquidation. Barclays were owed £35,000, and we helped negotiate a reduction to a one-off payment of £15,000.

A Teesside based electrical contractor who had guaranteed a trade supplier account. He owed £12,000, but upon review of the documentation, it appeared that the original guarantee may not have been validly entered into. The trade supplier agreed a settlement of £2,500.

Please email me on ewall@robsonscott.co.uk for more information on your Personal Guarantee.