How to Get Out of a Personal Guarantee

Working out how to get out of a personal guarantee usually comes down to two questions: is the personal guarantee valid, and will the lender agree to release you or settle for less? A full release is rare, but it’s often possible to bring the amount you owe down a long way.

If your company is struggling and you’re worried about your home or savings, the sooner you act, the more options you have. At BCIA Recovery & Turnaround, we help directors check whether a personal guarantee stands up and negotiate with lenders to reduce what they owe. Contact us today for a free, confidential consultation.

What a Personal Guarantee Means for You

A personal guarantee is a promise that you’ll repay a company debt yourself if the company can’t. Lenders, landlords and suppliers often ask for one before they’ll lend to a limited company or agree a lease.

Normally, a limited company’s debts belong to the company. A personal guarantee cuts through that protection, so if the company falls behind, the lender can come after your personal assets, including your home.

A few points catch directors out:

It doesn’t end when you leave: resigning as a director doesn’t cancel the guarantee for money already borrowed.
It doesn’t end on liquidation: a company going into liquidation is usually what triggers the lender’s demand.
You may be liable for the full amount: if you signed alongside other directors, the lender can usually pursue any one of you for the whole debt.

Check whether your guarantee is limited to a set amount or covers everything the company owes. BCIA can read through the paperwork with you and explain what you’re really on the hook for.

Can You Get Out of a Personal Guarantee?

You can get out of a personal guarantee in some cases, usually when it wasn’t set up properly or when the lender agrees to release you. The common grounds for challenging one are:

It isn’t in writing: under section 4 of the Statute of Frauds 1677, a guarantee must be in writing and signed by the person giving it.
You were misled or pressured: if the lender misrepresented what you were signing, or you were pushed into it, the guarantee may not stand.
The loan changed without your agreement: if the lender changed the terms of the company’s loan without your consent, you may be released, unless the guarantee allows for changes.
The lender didn’t follow the terms: some guarantees set rules on how and when the lender can demand payment, and a demand that breaks them can be challenged.

Bank guarantees are usually drafted carefully to close these gaps, so a challenge won’t always succeed. Even so, a weakness in the paperwork gives you leverage when you negotiate. BCIA can review your guarantee for these issues before we speak to the lender on your behalf.

How to Get Released From a Personal Guarantee

Getting released from a personal guarantee is easiest when the lender’s risk is covered another way. Situations where a release is realistic include:

Selling the business or stepping down: the new owner or remaining directors may be able to give a replacement guarantee.
Refinancing: if the company moves its borrowing to a new lender, the old guarantee can be released once the old loan is repaid.
Offering other security: the lender may accept security over a business asset in place of your guarantee.
The debt has been repaid: if the company has cleared the loan, ask the lender to confirm in writing that your guarantee has ended.

Since 8 September 2025, lenders signed up to the Lending Standards Board’s code must send guarantors an annual reminder that their guarantee is still in place, as Gateley explains. If you get one for a business you’ve left, contact the lender straight away.

Always ask for a release in writing, and get written confirmation once it’s agreed. BCIA can put the request to the lender for you and set out why a release is reasonable.

How to Reduce What You Owe Under a Personal Guarantee

If a release isn’t possible, you can often reduce what you owe. Lenders know that chasing an individual through the courts is slow and costly, so many will consider a sensible offer. Here’s how it usually works:

Verify the figure: make sure the amount claimed is right and that any money raised from the company’s assets has been taken off first.
Make an offer: a lump-sum settlement for less than the full amount is often attractive to a lender who wants the matter closed.
Agree a payment plan: if you can’t pay a lump sum, a monthly arrangement can stop the lender taking legal action.
Share the burden: if other directors also signed, you may be able to claim back a share of what you pay from them.
Check for insurance: if you took out personal guarantee insurance when you signed, it may cover part of what the lender is claiming. Look at the policy before you agree to anything.

Negotiating your own guarantee is hard when it’s your home on the line. It’s easy to offer too much too soon, or to give the lender information that weakens your position. When BCIA negotiates on your behalf, the conversation stays focused on the facts. We use any weaknesses in the guarantee as leverage and push for a figure you can realistically pay.

What Happens If You Can’t Pay a Personal Guarantee?

If you can’t pay a personal guarantee, the lender can take legal action against you personally, and in serious cases this can put your home at risk. If you’ve received a formal demand, don’t ignore it. Respond within the deadline it gives, even if only to say you’re taking advice.

The lender may get a County Court Judgment and then apply for a charging order, which secures the debt against your property. If you owe £5,000 or more, they can also apply to make you bankrupt under section 267 of the Insolvency Act 1986.

These steps take time, and there’s usually room to negotiate before any of them happen. BCIA steps in early, before court action starts, while there’s still the widest choice of options.

Personal Guarantee FAQs

Once directors know how to get out of a personal guarantee, these are the questions they tend to ask BCIA next.

Does a personal guarantee end if the company goes into liquidation?

A personal guarantee doesn’t end if the company goes into liquidation. In fact, liquidation is usually what prompts the lender to call it in.

The lender will normally claim what it can from the company’s assets first and then ask you for the rest. That’s why it pays to deal with the guarantee before the company enters any formal insolvency process.

Can I get out of a personal guarantee by resigning as a director?

You can’t get out of a personal guarantee just by resigning as a director, because the guarantee is a personal promise separate from your role.

Some guarantees let you give notice to stop covering future borrowing, but you’ll stay liable for what the company already owes. To be fully released, you need the lender’s written agreement.

Did my bounce-back loan come with a personal guarantee?

Your bounce-back loan did not come with a personal guarantee, because the government scheme didn’t allow lenders to take one, as the British Business Bank confirmed.

That doesn’t mean you’re always in the clear, though. Directors can still face personal claims if the money was misused, which our page on bounce-back loan issues explains.