What to do next
Get the guarantee and read its scope
Is it limited in amount or time, does it cover renewals and extensions, is it joint and several with other guarantors, and does it waive the requirement to pursue the company first? These determine your exposure.
Check whether the obligation changed
A material variation of the underlying loan or lease without the guarantor's consent can discharge a guarantee. So can a failure to obtain independent legal advice in some circumstances, particularly for spousal guarantees.
Look at what other guarantors and security exist
If others guaranteed the same debt, contribution may be available between you. Existing security over company assets should generally be realised, and the guarantee's wording may or may not require it.
Negotiate from the real numbers
Creditors frequently settle guarantees below face value, particularly where the guarantor's assets are limited or exempt. Get advice on your actual exposure before agreeing to anything.
Frequently asked questions
Do they have to sue the company first?
Often not — many guarantees expressly waive that requirement. Read the wording; it is the first thing that determines your position.
Can a guarantee be unenforceable?
Sometimes — improper execution, material variation of the underlying obligation without consent, or absence of independent legal advice in certain circumstances. These are narrow but real.
Does my spouse's signature matter?
It can. Where a spouse guaranteed without independent legal advice, particularly under pressure, enforceability may be challengeable. Get advice.
Will bankruptcy clear it?
Personal bankruptcy generally releases guarantee debts, but that is a significant step with wide consequences. Discuss it alongside negotiation rather than as a first move.
This is general information, not legal advice. Laws vary by location and every situation is different — speak with a qualified lawyer about your specific circumstances.