BANKRUPTCY LAW

No, the purpose of a personal guarantee is to protect the creditor if the principal debtor goes bankrupt or does not fulfill its obligations. As such, you will be responsible for all debts which you undertook to personally guarantee.

A personal guarantee is an undertaking given by a person to guarantee the obligations of another person, company or entity should they not respect their obligations. In other words, if the debtor does not honour its obligations you will be called upon to execute them. A bank will generally require the shareholder of a start-up company to guarantee the obligations of the company.

If you sold goods to this company in the last 30 days, you may be entitled to take them back. Otherwise you need to obtain a proof of claim and file this with the trustee. If any proceeds are left after the payment of the trustee fees, you may be entitled to a dividend but need to file a proof of claim to receive this dividend.

Putting someone in bankruptcy is a major step and one that is not done very often. Usually creditors will take legal proceedings and sue you to obtain payment of their debt rather than putting you in bankruptcy. There are costs of several thousand dollars to put someone in bankruptcy and these often need to be paid by the creditor putting you in bankruptcy. In addition to this, they need to prove at least $1,000.00 in indebtedness and an act of bankruptcy, not to mention pay a lawyer to take proceedings against you in bankruptcy. If you don't have any assets or money there is no advantage to put you in bankruptcy as there is nothing to collect for a creditor and the bankruptcy will extinguish their debt.

Bankruptcy is usually a last resort solution and should be used carefully. Putting someone in bankruptcy is a major step and one that is not done very often. It is often more advantageous to take legal proceedings and sue to obtain payment rather than putting someone in bankruptcy. Bankruptcy is normally used when a debtor is making preferential payments to his creditors, is disposing of his assets for little or no consideration and there are many creditors suing the debtor. There are costs of several thousand dollars to put someone in bankruptcy and these often need to be paid by the creditor starting the bankruptcy proceedings. In addition to this, you need to prove at least $1,000.00 in indebtedness and an act of bankruptcy. If the debtor does not have any assets or money then there is no advantage to put him in bankruptcy as there is nothing to collect and the bankruptcy will extinguish their debt.