Directors of limited companies may face bankruptcy if they have personally guaranteed the borrowings of the company. In a liquidation of a business, many creditors both secured and unsecured do not get their debts paid in full. Often the directors of the business have had to secure borrowings for the firm by providing their own assets as collateral. If the company cannot afford to repay the loans provided to it, or discharge an overdraft or invoice finance then the directors who agreed to pay those debts in the stead of the company will be called into do so.

It is my general experience that guarantees are often limited to set sums, for instance £25,000 or £50,000. Equally often a charge is taken over property of the director, usually a matrimonial home. These personal assets are at risk if the company debts cannot be re-paid. In rare occasions, where the loans are perceived as risky or maybe open ended in nature, unlimited guarantees may be obtained.

If the Personal Guarantee is called in the Director may be given some small time in which to arrange his affairs to pay off the debt. However, it is often the case that as the company folds so does any income that the director could earn to pay off the liability to the lender.

If the director has no assets and suddenly a large amount of liability, often bankruptcy may be the only answer. There are companies who have experience in taking directors through the bankruptcy process, stage by stage. They prepare the statement of affairs and the petition. They ensure that the documentation is accurate and reflects the reality of the current situation and not the lifestyle that the director may have previously lived.

They book the court hearing and also attend court, to ensure that paperwork is filed correctly, and if there are any questions from the judge, they can be answered without too much distress. They will be available for advice if required, following any interview with the Official Receiver.

They can subsequently then advise on which bank accounts to apply for and after the director has emerged from his year in bankruptcy, they can help him become a company director again and seek any funding now required.

If you are a company director and you are either worried about going bankrupt or require help to do so, please call an expert for advice without delay.