When a company debt is backed by a personal guarantee, the whole risk profile changes. Instead of chasing a company that might dissolve tomorrow, you have a claim against a real person with real assets. Understanding guarantees is essential whether you are recovering, buying or selling this kind of debt.
What is a personal guarantee?
A personal guarantee is a promise, usually by a company director or owner, to pay the company's debt personally if the company does not. Lenders, suppliers and landlords often require them precisely so that a limited company cannot be used as a shield against every debt.
Why guarantees are so valuable to creditors
- If the company becomes insolvent, the guarantee survives — you can still pursue the guarantor.
- The guarantor is often a homeowner or holds other assets a charging order can target.
- It effectively gives you two debtors instead of one.
A guaranteed debt is one of the strongest positions a creditor can hold: the company's failure does not wipe out your claim.
Making sure the guarantee is enforceable
Not every guarantee holds up. To be enforceable it must generally be in writing and signed by the guarantor (a requirement rooted in the Statute of Frauds 1677). Check that the document is properly executed, that it clearly covers the debt in question, and that the guarantor received it before signing. Poorly drafted or unsigned guarantees can collapse.
How to enforce against a guarantor
- Make a formal demand under the guarantee once the company defaults.
- If unpaid, issue a claim against the guarantor personally.
- On judgment, use enforcement tools — a charging order over the guarantor's property is often the most effective.
Why a guaranteed debt sells for more
To a debt buyer, a guarantee dramatically improves the odds of recovery, so it commands a higher price and a smaller discount. When you list a guaranteed debt for sale, say so prominently and have the signed guarantee ready to show — it is the single feature most likely to attract strong offers.
➜ Sell my guaranteed debt from £19.90
A note on limitation
Claims under a guarantee are subject to limitation like any other debt — usually six years for a simple contract guarantee, or twelve if the guarantee is executed as a deed. Keep an eye on the clock and any acknowledgements from the guarantor.
Conclusion
A personal guarantee can transform a fragile company debt into a robust claim against an individual with assets. Check it is properly signed and covers your debt, enforce it against the guarantor if the company fails, and when selling, make the guarantee front and centre — it is exactly what serious buyers are looking for.
