If your company is heading towards liquidation and you have signed personal guarantees, it is very normal to feel anxious. You might be worrying about your home, your savings and what this could mean for your family.
Personal guarantees do not disappear when a company closes. They can become enforceable against you personally, but that does not mean everything is lost. There are clear rules on what lenders can do, and there are practical options to negotiate, settle or, in some cases, dispute what you are being asked to pay.
What Is a Personal Guarantee and How Does It Work?
Personal Guarantee: Definition
A personal guarantee is a promise you give to a lender, landlord or supplier that you will repay a specific company debt if the business cannot. In effect, you agree that if the company does not pay, you will.
Personal guarantees are common when a business is seeking:
Bank loans and overdrafts
Asset or vehicle finance
Invoice finance or factoring
Commercial leases
Larger trade credit limits
For the lender, a guarantee reduces risk. For you, it cuts through the normal protection of a limited company. Company debts are generally dealt with through the formal company liquidation process, while personally guaranteed debts can follow you as an individual.
Types of Personal Guarantee
The detail of the guarantee makes a big difference to your risk. Common types include:
Unlimited guarantees
You can be liable for the full debt, plus interest, fees and enforcement costs, until it is paid in full.Limited guarantees
Your liability is capped at a set figure, such as £50,000 or £100,000. The company may owe more, but your maximum responsibility is that agreed cap.Joint and several guarantees
Two or more people (often several directors) sign the same guarantee. The creditor can pursue any one guarantor for up to the full amount, leaving you to seek contributions from the others later.
You may also see “all monies” guarantees, which cover not only one specific loan but all existing and future borrowing with the same lender. If your company later takes out new facilities with that bank or finance provider, your exposure can grow without you signing a fresh document.
Understanding which type you have signed is crucial. It affects:
How much the creditor can claim from you
Whether they can pursue you for future borrowing, not just the original loan
Whether they can demand payment from you alone, even if other guarantors exist
Sectors We Support
We support company directors in every sector, from construction firms and logistics companies to pubs, cafés, restaurants, hotels, retailers and manufacturers. Our advice is always clear, confidential and shaped by real experience in your industry. Whether you’re dealing with unpaid tax, supplier pressure or falling income, our team understands the challenges and will guide you through the best next steps.
How Liquidation Affects Personal Guarantees
When a company goes into liquidation, most unsecured business debts are dealt with inside the formal process. The liquidator collects assets, pays the costs and then distributes what is left to creditors in a set order. Any remaining unpaid company debt is written off at the end.
A personal guarantee sits outside that process. It is a separate promise from you as an individual. Liquidation usually confirms that the company cannot pay. That is the point at which many guarantees become enforceable against you.
In practice, that means:
The creditor may still claim in the liquidation for whatever can be recovered from company assets
Separately, they can request payment from you for any shortfall covered by the guarantee
If you ignore a demand, the creditor may move to court action. That can lead to a County Court Judgment and, in serious cases, further enforcement action or even bankruptcy proceedings.
The Insolvency Service’s director information hub makes it clear that directors can stay personally liable for guarantees even after formal insolvency procedures.
Acting before everything is “crystallised” often keeps more options open. Once you know liquidation is likely, it can help to speak to a regulated insolvency practitioner, understand your guarantees and plan both the company route and your personal position together. We can also help to advise you on what happens to company debts in liquidation.
When Are Lenders Likely to Call In a Personal Guarantee?
Most lenders do not wait indefinitely to see what happens. They usually review guarantees as soon as there are signs that your company cannot meet its commitments.
Early Warning Signs
Guarantee documents often define a wide range of “default” events, such as:
Missed or late loan repayments
Persistent overdraft excesses
Cancelled direct debits
Serious arrears with rent or asset finance
Other warning signs include:
Facilities being reduced or withdrawn
Requests for updated financial information
New conditions before a facility will be renewed
These are often hints that the lender is checking whether they may need to rely on your guarantee.
Insolvency Triggers
Many guarantees include specific insolvency events, such as:
A proposal to place the company into Creditors’ Voluntary Liquidation (CVL)
A winding up petition being presented
A winding up order being made by the court
The appointment of an administrator
Once any of these events occur, the bank or finance company will usually treat the company as being in default and may call on the guarantee, even while the company liquidation is still progressing.
How Fast Can Enforcement Escalate?
If a creditor believes there is a realistic chance of recovery, action can move quite quickly:
Demand letter setting out the amount claimed under the guarantee and a deadline.
Referral to solicitors or collection agents if you do not respond.
Court proceedings leading to a County Court Judgment if the claim is upheld or undefended.
Further enforcement, including enforcement agents, charging orders over property, attachment of earnings or, in serious cases, bankruptcy.
Not every case will follow all of these steps, but silence rarely helps. Even a brief, calm response can open the door to discussion instead of immediate pressure.
The Emotional Impact
This stage can feel very personal. A company failure is hard enough without letters that mention your home or savings. It is easy to put envelopes aside.
You are not the only director in this position, and you do not have to navigate it alone. A short conversation with an insolvency practitioner from Anderson Brookes can help you understand what they are likely to do, what you can afford and where there may be room to negotiate.
First Steps to Take If You Are Worried About a Personal Guarantee
If you think a personal guarantee might be called in, your main goal is to understand your position. You are not trying to fix everything at once. You are simply gathering facts so later decisions are based on reality, not fear.
Step 1: Gather the paperwork
Collect any documents that might relate to guarantees:
Facility letters and loan agreements
Standalone guarantee documents
Terms and conditions for overdrafts, invoice finance or asset finance
Account opening forms and supplier terms
If you cannot find them, ask the lender or supplier for copies. You are entitled to see the documents they say you agreed to.
Step 2: Identify what you have guaranteed
Read each document slowly. Note:
Whether the guarantee is limited to a set figure or unlimited
Whether it covers a single facility or all monies you owe to that lender
Whether you are the sole guarantor or joint and several with others
Whether it is supported by security over your home or other personal assets
You do not have to understand every legal phrase. Focus on sections that explain how much can be claimed, when payment can be demanded and what happens if you do not pay.
A simple note for each guarantee, in your own words, will help later. For example:
“Bank loan: limited guarantee £50,000, no charge on home.”
“Invoice finance: unlimited guarantee, joint with co-director.”
Step 3: List all guarantees in one place
Many directors discover more guarantees than they expected. You might have:
Several guarantees with the same bank
Old guarantees that were quietly extended or renewed
Guarantees buried in supplier credit agreements
A simple table can help:
| Creditor | Facility | Limit | Security |
|---|---|---|---|
| Bank A | Term loan | Limited £50,000 | None |
| Finance company B | Invoice finance | Unlimited | Joint with co-director |
| Landlord C | Commercial lease | Limited £30,000 | Rent deposit, no property |
This makes it much easier to see where the biggest risks sit.
Step 4: Understand your personal starting point
Next, look at your own finances. Note your:
Monthly income and essential household costs
Savings and investments
Property and estimated equity
Existing personal debts such as mortgages, loans and credit cards
This helps you answer three questions:
Could you realistically repay the guarantees in full?
If not, what level of lump sum or monthly payment might be possible?
Are there obvious assets at risk, such as a buy to let property or cash savings?
Putting numbers on paper can feel difficult, but it often makes the situation feel more manageable.
Step 5: Avoid common early mistakes
While you are gathering information, try not to:
Assume liquidation wipes out the guarantee. It does not. Liquidation deals with company debts only; personal guarantees remain your responsibility.
Forget that guarantees often cover interest, legal fees and recovery costs, not just the basic loan.
Rely entirely on other guarantors. With joint and several guarantees, the creditor can choose who to pursue.
Offer new security, such as a charge over your home, in panic, without advice.
A licensed insolvency practitioner can help you interpret what you have found and work out whether negotiation, settlement or more formal solutions are likely to give you the safest outcome.
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Negotiating Personal Guarantee Debt After Liquidation
Once a personal guarantee has been called in, it can feel as though everything is fixed. In reality, many creditors prefer a sensible agreement to a long, uncertain court process.
The aim is not to say yes to anything. The aim is to move from a frightening demand to a clear, written arrangement that you can live with.
Open a Constructive Dialogue
If you receive a demand letter, a short, calm reply is usually better than silence. You might explain that:
You acknowledge the letter and the guarantee
The company has entered, or is entering, liquidation
You are gathering information about your position
You would like to agree a realistic way forward
Before you respond, it helps to have:
Notes on what you have guaranteed
Any liquidation reports showing what has been recovered from company assets
A simple summary of your income, outgoings, debts and assets
We often help directors prepare this first reply so that it is clear and honest without admitting more than is necessary.
Share the Right Financial Information
Creditors will usually ask for evidence of your financial position. This might include bank statements, details of income and household bills, a list of other debts and basic information about property and savings.
Being honest matters. If a creditor later discovers information you did not disclose, trust can be damaged and they may become less willing to compromise.
Debt charities such as StepChange set out how sharing realistic budgets can support negotiating with creditors and lead to affordable arrangements.
Payment Plans and Staged Arrangements
If you cannot raise a lump sum, a structured payment plan may be the most realistic option. This usually involves:
Agreeing an affordable monthly amount based on your budget
Asking for interest and charges to be frozen, or at least reduced
Setting review points so the arrangement can be adjusted if your circumstances change
The benefit is predictability. You know what is going out each month and can plan around it. The drawback is that the debt may remain in place for several years, especially where the original balance is large.
Full and Final Settlements
Where you can raise a lump sum, perhaps with help from family or from selling an asset, a full and final settlement can bring quicker closure. The creditor agrees to accept a single payment, lower than the full balance, on the condition that they do not chase you for the remainder.
Key points:
The offer should be credible, based on your real resources.
It can help to explain that the funds are limited, for example a one off gift or remortgage.
You must have written confirmation that the payment is accepted in full and final settlement of your liability under the guarantee.
Debt advice organisations and sample letters from charities such as National Debtline stress the importance of clear wording, so there is no doubt that the matter is settled.
Protect Your Credit Position
Not every guarantee problem will appear on your credit file, but:
Defaults and County Court Judgments usually stay on file for six years
Settled debts are generally viewed more favourably than unpaid ones
Partial settlements can be recorded as such and may affect future credit decisions
For many directors, the priority is to protect their home and household finances first. We will still talk with you about how different options may affect your credit record so you can make informed choices.
Keep Everything in Writing
Whatever you agree should be recorded in writing. Keep:
Copies of settlement offers and responses
Formal payment plan agreements
Proof of payments made
Good records protect you if there is a dispute in future, or if the debt is later sold to another firm.
Get help from a licensed insolvency practitioners today. Call Anderson Brookes on 0800 1804 935 or get advice by email at advice@andersonbrookes.co.uk.
When You Might Be Able to Dispute a Personal Guarantee
In many cases, a personal guarantee will be enforceable. There are, however, situations where you may have grounds to challenge either the guarantee itself or the amount claimed.
Disputes need to be based on clear legal points and evidence, not general feelings of unfairness. A solicitor with insolvency or banking experience can help you assess this.
Problems with the Guarantee Document
A personal guarantee is a contract. Issues that may justify a challenge include:
Unclear wording about which debts are covered
Missing or incorrect signatures
Wrong names or company details
A guarantee that was presented as limited but drafted as unlimited
Courts often look closely at the exact language used. If a lender is trying to stretch the guarantee beyond its natural meaning, there may be scope to argue for a narrower interpretation.
How You Were Treated When You Signed
The circumstances around signing can also matter. Potential arguments include:
You were placed under significant pressure to sign without time to consider
Key risks were downplayed or misrepresented
You did not have a fair opportunity to understand the document
The Federation of Small Businesses has highlighted how some “harsh” uses of personal guarantees can force directors to put their homes at risk and may discourage investment. That wider concern does not automatically make a guarantee invalid, but it shows why courts are increasingly alert to fairness and transparency.
When the Figures Seem Wrong
Even where the guarantee itself is sound, you may have questions about the amount being demanded. For example:
The balance includes debts that fall outside the guarantee period
Recoveries from company assets or other guarantors have not been credited
Fees and charges appear higher than the terms allow
In these cases, you can ask for a detailed statement showing how the figure has been calculated and share it with your adviser.
Enforcement Process and Notices
There can also be issues with the way a guarantee is enforced, such as:
Demands sent to an old address when you had provided up to date details
Incorrect figures quoted in statutory demands or claim forms
Failure to follow required steps before starting bankruptcy proceedings
These points may not remove liability entirely but can affect what action the creditor is allowed to take and when.
Evidence that Helps
Documents that support a dispute include:
The guarantee and any later variations
Facility letters and loan agreements
Emails or letters around the time you signed
Statements showing how the debt has changed over time
The documents you gathered earlier are a good starting point. A short timeline, from entering the facility to the company’s insolvency, will also help a solicitor and your insolvency practitioner see the full picture.
Personal Guarantees Across Different Types of Finance
Personal guarantees sit behind a wide range of business borrowing. Typical examples include:
Bank Loans and Overdrafts
Banks and alternative lenders often ask for guarantees on term loans and overdrafts, especially where the company is small or has limited trading history. Data from Purbeck Personal Guarantee Insurance shows that the average personal guarantee backed small business loan reached around £175,000 in Q4 2024, and demand for personal guarantee insurance rose by 45 percent in 2024 compared with 2023.
These figures show how significant the numbers can be.
Asset and Vehicle Finance
Asset finance is widely used to fund vehicles, machinery and equipment. Agreements often combine:
Security over the asset itself
A personal guarantee to cover any shortfall on sale if the company fails
If the asset is sold in the liquidation for less than the outstanding finance, the finance company may look to the guarantor for the difference.
Invoice Finance and Factoring
Invoice finance supports cash flow by advancing against unpaid invoices. Facilities are often backed by:
A debenture over company assets
A personal guarantee from one or more directors
If customers do not pay, or the ledger value falls sharply before liquidation, the finance provider may rely on the guarantee to recover losses.
Commercial Leases and Property Finance
Landlords and commercial lenders may seek personal guarantees where:
The company is new or has limited accounts
The rent or loan is large compared with the company’s size
The guarantee might cover unpaid rent, service charges or dilapidations. If the company enters liquidation owing rent, the landlord can claim in the liquidation and also pursue the guarantor personally.
Personal Guarantees, Your Home and Personal Finances
For many directors, the hardest part of a personal guarantee is the fear that it might cost them their home or long term savings. That fear is understandable, but outcomes vary widely.
Can a Personal Guarantee Put Your Home at Risk?
Your home can be at risk in two main ways:
You have given a legal charge or second mortgage over it as part of the guarantee
A creditor obtains a County Court Judgment and then a charging order over your share of the property, and may later seek an order for sale
Courts consider family circumstances carefully, but they do have the power to allow enforcement in serious cases.
Savings, Investments and Income
Creditors may also look at:
Cash savings and investments
Buy to let or holiday properties
High value personal assets
They can sometimes seek an attachment of earnings order, which diverts part of your salary to repay the debt.
This is why it is so important to build a realistic picture of your finances and to seek advice before enforcement reaches advanced stages.
Credit Records and Future Borrowing
Serious guarantee issues, such as defaults or County Court Judgments, usually stay on your credit file for around six years. During that time you may find it:
Harder to obtain a mortgage or remortgage
More difficult to borrow for a new venture
More expensive to access some forms of credit
Many directors do rebuild their credit over time. Lenders will often focus on your current income, stability and recent conduct once a few years have passed.
Running Another Company
A called personal guarantee does not automatically stop you being a director again. In most cases you can continue in business, provided there has been no misconduct and no disqualification.
However, lenders and suppliers may:
Ask more questions about your past
Require higher deposits or stronger security
Be more likely to insist on guarantees for new borrowing
Handling current guarantee claims calmly and keeping clear records of any settlements can help you present a responsible track record in future.
How Personal Guarantees Affect Insolvency Options
When you are deciding what to do about the company, personal guarantees are one part of the picture. The key is to look at the business and your personal position together.
Creditors’ Voluntary Liquidation (CVL)
A Creditors’ Voluntary Liquidation is often the most controlled way to close an insolvent company. You work with a licensed insolvency practitioner, bring trading to an orderly end and deal with creditors through a formal process.
A CVL:
-
Stops new company debts building up
-
Draws a clear line under ongoing losses
-
Provides accurate information about what the company owes and what assets exist
Personal guarantees sit alongside this. The creditor can claim in the liquidation and also pursue you for any shortfall within the guarantee. Knowing the true shortfall often helps you negotiate more realistically on the personal side.
Compulsory Liquidation and Winding-Up Petitions
If a creditor issues a winding-up petition, the court can order the company into compulsory liquidation. This removes much of your control over timing and can lead to bank account freezes and reputational damage.
From a personal guarantee point of view:
-
A petition or winding-up order is usually a trigger event
-
Creditors may move quickly to demand payment from you
-
You have less time to prepare and gather information
Where possible, speaking to Anderson Brookes early, before matters reach this stage, can give you more choice.
Business Rescue Options
If the business itself is still viable, options such as administration or a Company Voluntary Arrangement (CVA) may allow it to continue or be sold. The impact on guarantees varies:
-
Some lenders may agree to vary or release guarantees as part of a rescue deal
-
Others may insist that guarantees remain in place regardless
Any rescue plan needs to be considered alongside its effect on you personally, not just the company.
Personal Insolvency as a Last Resort
If personal guarantee claims are clearly unmanageable, more formal personal options such as an Individual Voluntary Arrangement (IVA) or bankruptcy may come into the picture.
These can:
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Combine several personal debts, including guarantees
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Stop most enforcement once in place
-
Offer a route to eventual debt relief in return for contributions or the sale of certain assets
They also have serious consequences for your credit record and, in some situations, the way you can act as a company director. You should always take regulated advice before considering them.
Anderson Brookes can explain how these personal options interact with company insolvency and introduce you to trusted personal debt specialists where appropriate.
Personal Guarantee FAQs
Does liquidation wipe out my personal guarantees?
No. Liquidation deals with the company’s debts. Personal guarantees remain your responsibility if they are valid and the company has not repaid the guaranteed debt in full.
Will I definitely lose my home?
Not necessarily. Your home is at greatest risk where the guarantee is directly secured on it or where a creditor has gone all the way to a charging order and order for sale. Many cases settle long before that point.
Can a creditor chase me years after liquidation?
Yes. If there is no settlement or court order that draws a line under matters, a valid personal guarantee can often be enforced for many years, subject to limitation rules.
Can I be a director again if a personal guarantee is enforced?
In most cases, yes. You can usually continue to act as a director provided there has been no misconduct and no disqualification order, although lenders may look more closely at your history.
Do I need both a solicitor and an insolvency practitioner?
Often they work best together. A solicitor advises on the legal strength of the guarantee and any defence. A licensed insolvency practitioner like Anderson Brookes helps you manage the company’s insolvency, your overall debt position and your practical options.
How We Can Help
Trying to deal with company debts, personal guarantees and family responsibilities on your own is exhausting. It can feel as though every letter is a fresh threat and every decision has huge consequences.
When you contact Anderson Brookes, we will:
Listen carefully to what has happened so far
Review your company’s position, including any secured creditors and debentures where relevant
Help you decide whether liquidation, rescue or another route is right for the business
Look at your personal guarantees and finances alongside the company’s debts
Support you in preparing realistic budgets and proposals for creditors
Work alongside solicitors and personal debt specialists where legal disputes or personal insolvency options need to be explored
Our aim is to give you calm, confidential guidance so that you can make decisions with a clear understanding of the risks and the protections available.
Get Support with Personal Guarantees
If you are lying awake worrying about personal guarantees and what liquidation might mean for your own finances, you do not have to keep carrying that alone.
A short, confidential conversation with a regulated adviser can help you understand where you really stand and what options you have to move forward safely. Even if things already feel as though they have gone too far, you may have more choices than you think.
You can get in touch through our online enquiry form or call us on 0800 1804 935 to talk things through.
We will listen without judgement, explain your options in clear terms and help you take the next step that feels right for you.
