Am I personally liable?

Generally, yes. By signing a personal guarantee, you agreed to step in and pay the debt if the business fails to do so. Your personal assets are at risk.

Can I challenge the guarantee?

Depending on how it was signed, drafted, and how the lender behaved, there may be grounds to challenge its validity, though this requires careful legal assessment.

Yes. Many lenders prefer an agreed settlement over forcing someone into bankruptcy. Proactive negotiation is often the most practical route.

What happens if I cannot pay?

The lender may issue a statutory demand and subsequently petition for your bankruptcy. You must seek advice immediately to explore settlement or formal insolvency options.

What should I do first?

Do not ignore the lender. Gather the original guarantee, the loan documentation, and seek professional guidance to assess the validity of the claim before making any payments.

Procedural Insight

I Signed A Personal Guarantee – What Are My Options?

Understand your options after signing a personal guarantee, from negotiation to challenging the guarantee itself.

The Direct Answer

Signing a personal guarantee does not automatically mean you have no options. The guarantee itself, the lender's behaviour and your circumstances may all affect what happens next.

Detailed Explanation

Finding out that a lender is calling in a personal guarantee can be a frightening experience, as your personal assets — including your home — may be at risk. However, you are not out of options.

The first step is always to review the documentation. Just because a lender claims you owe the money does not mean the paperwork is flawless or that they have followed the correct procedures. You need to understand exactly what you are liable for, whether liability is capped at a certain amount, and if there are other guarantors involved.

If the guarantee is valid, your options usually center around negotiation and settlement. Lenders are commercial entities; they want their money back with the least amount of friction. If you engage early, you can often negotiate a payment plan or a reduced full-and-final settlement. If you simply ignore the correspondence, the lender will likely escalate to issuing a statutory demand, dramatically limiting your options and increasing costs.

Common Mistakes

When dealing with complex procedures, panic or lack of clarity can lead to errors. Here are the most common mistakes people make:

Ignoring the situation hoping it will resolve itself.
Failing to seek professional guidance early enough.
Missing strict legal or procedural deadlines.
Communicating emotionally rather than factually.
Making informal agreements without getting them in writing.

Readiness Checklist

Preparation Checklist

Track your progress before taking action.

Have you gathered all relevant documents and correspondence?

Do you know the exact dates of key events?

Have you identified your main objectives or desired outcomes?

Are you aware of any upcoming deadlines?

Have you kept a record of all communications?

Frequently Asked Questions

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Article Author

Jeff Harris

Senior Adviser, Litigancy

Over 35 years' experience across finance, business, property and complex disputes. Today Jeff combines real-world experience with Alfred to help people understand complicated situations and make better decisions.

Published: January 2024•Updated: June 2024