Bankruptcy of any citizen or company is considered a specific process. It is accompanied by a search for all creditors and debt repayment, for which rehabilitation or bankruptcy proceedings are carried out. Often, bank debtors declare themselves bankrupt, having issued a mortgage, consumer loan or car loan. To arrange such a large loan, they often attract guarantors. Therefore, the question arises of how the guarantee is involved in the bankruptcy of the debtor. This question worries every person who has acted as a guarantor for a relative, acquaintance, or co-worker.
What is the responsibility of the guarantor?
The problem of bankruptcy guarantees affects many citizens and companies. The rights and obligations of the guarantors are stipulated by the contract of guarantee. It is signed simultaneously with the preparation and conclusion of a loan agreement.
Guarantors are not co-borrowers, but at the same time they have joint liability to the bank along with the borrower, unless otherwise specified in the contract.
For many banks, the guarantor has the same responsibility as the direct debtor. Therefore, if the borrower has difficulty repaying the loan, for example, due to bankruptcy or unwillingness to pay funds, then the burden is easily transferred to the guarantor.
When using the guarantee in case of bankruptcy of the debtor, the bank may choose only one guarantor, even if several guarantors are prescribed in the contract. It is the chosen citizen who becomes responsible for loan payments.
Warranty Risks
A guarantee in case of bankruptcy of a debtor implies the occurrence of certain risks with the guarantor. These include:
- a citizen may suffer financially, since he will not only have to pay a monthly loan payment, but also pay various interest, penalties and fines accrued for the period when the direct payer refused to transfer funds;
- credit history is spoiled not only by the direct debtor, but also by the guarantor, therefore delays are reflected in his dossier;
- the possibility of obtaining a loan for yourself is reduced;
- quite often, by a court decision, property belonging to the guarantor is confiscated, after which it is sold in order to pay off the debts of the direct payer.
Therefore, many citizens are thinking about whether it is possible to terminate the contract of guarantee. This procedure is considered difficult, as lenders try to prevent this situation by using various options.
Termination of the guarantee in case of bankruptcy of the main borrower is possible only with the consent of all parties to the transaction, to which the bank belongs. Credit institutions rarely agree to such a procedure, since they wish to return their funds in all possible ways.
It is erroneous that the guarantee for bankruptcy of the main debtor ceases after the death of the borrower or divorce of citizens.
What are the requirements for guarantors?
Requirements depend on different situations. These include:
- The borrower declares himself insolvent. Does the guarantee in case of bankruptcy of the main debtor cease? Under the law, the guarantee contract remains valid even under such conditions, and debt is not written off.All the nuances of further actions by the guarantor are specified directly in the agreement. Often, a debt is completely transferred from a bankrupt to his guarantor.
- The surety declares itself bankrupt. This is possible in connection with the citizen’s own debts or on the basis of a guarantee agreement.
Requirements in any situation will be standard. For a citizen to be declared bankrupt, certain conditions must be met. These include the presence of debt in excess of 500 thousand rubles, and also the delay must exceed three months. The citizen should not have funds with which he can satisfy the requirements of creditors.
A bankruptcy initiator can be a creditor, a direct debtor or even a guarantor who does not want the amount of debt to increase due to accrued fines and interest. The bank independently chooses who will become bankrupt - the borrower or guarantor, as these people have joint responsibility. Therefore, guaranteeing a bankruptcy of a debtor is a risky process.
Grounds for declaring a debtor bankrupt
Each person who acts as a guarantor for another citizen who is issuing a large loan must remember that he may have financial obligations. He warrants that the borrower will promptly and conscientiously return funds to the bank. If this requirement is not met, then it is the surety who will deal with the return of the debt.
Debtors and guarantors may be declared bankrupt subject to the conditions:
- the direct borrower ceases to transfer funds under the loan agreement;
- the bank files a lawsuit, on the basis of which the debtor is declared bankrupt, after which the funds are recovered from the guarantor;
- bailiffs initiate enforcement proceedings;
- debt should exceed 500 thousand rubles;
- the surety is obliged to repay the debt with all accrued interest and penalties, for which it uses its funds and property;
- if the surety refuses to pay the funds, then enforcement measures are applied to it, which are represented by the seizure of accounts, debiting of bank accounts, as well as the arrest, confiscation and sale of valuable property.
Therefore, in bankruptcy, a guarantee is considered risky. Guarantor citizens must fully trust the direct borrowers so that there is no situation when they have to repay debts for other persons.
The concept of subsidiary liability
This responsibility is imposed on the guarantor if the borrower is declared bankrupt, therefore he cannot cope with his obligations to the creditor. Subsidiary liability can be applied even to persons who have performed various acts that have led to the fact that the borrower cannot repay the debt.
Banks often enjoy subsidiary liability for the bankruptcy of individuals. Surety allows lenders to demand repayment of debt by guarantors, rather than direct borrowers.
When does the guarantee end?
Termination of the guarantee in case of bankruptcy of the debtor is possible only in several situations. These include:
- the debtor independently repays the existing debt;
- compensation is provided, so the property of the borrower passes into the ownership of the creditor, if both parties agree to this;
- offset of existing debt;
- the debtor and the creditor are one person;
- there is an innovation, therefore, it is possible for the borrower to get a new loan, with which he repays the previous loan, and then can repay the new debt without difficulty;
- debt is forgiven by the creditor for various reasons;
- there is no possibility for the bank to use the guarantee for the transfer of debt on the basis of the conditions existing in the guarantee agreement;
- regional or federal regulations are issued on the basis of which the bank cannot transfer the debt to the guarantor.
Termination of the guarantee in case of bankruptcy of the borrower is considered a rare procedure, since usually direct debtors simply do not have their own funds to pay off the debt. Therefore, most often it is the guarantors who are obliged to pay off existing debts.
It is not uncommon for situations when several people are borrowers, for example, lawfully married citizens or close relatives. In this case, a plurality of persons arises in one obligation. Based on Art. 308 CC each person under such conditions has equal obligations.
Termination of the guarantee in case of bankruptcy of the debtor is allowed in the presence of a wedding decision. Therefore, guarantors often file a lawsuit in order not to repay the borrower's debts.
The consequences of the bankruptcy of the borrower for the guarantor
For any citizen, a guarantee in case of bankruptcy of a debtor is considered a risky process, since there is a possibility that the bank will require a refund from the guarantor. There are three options for solving this problem:
- annulment or termination of the contract of guarantee, but this is possible only through the court, as well as the citizen must have good reason for this process;
- repayment of debts of the borrower at his own expense, after which you can file a lawsuit in order to recover funds from the debtor;
- Declaring yourself bankrupt at the same time as the debtor.
Even if the guarantor completely repays the debts of the non-payer, he has the opportunity to return the funds if he filed a lawsuit in order to recover money from the debtor. The dispute is not only settled in court, as the parties can sign a peace agreement. If the procedure for declaring a debtor bankrupt has already been launched, then the guarantor is included in the list of creditors.
Another possibility for the guarantor is declaring himself bankrupt. This will allow you to get rid of debts, but will lead to many negative consequences.
The consequences of declaring the guarantor insolvent
In case of bankruptcy of the debtor, the guarantee is considered a risky process. Often, the guarantor simply does not have the means or property with which he could pay off the debts of the non-payer. Therefore, the only option is to declare bankruptcy. The procedure is considered complex and specific, and it also leads to many negative consequences. These include:
- if a citizen does not have personal savings that could be used to pay off debt, his property will be sold at auction, and the proceeds from this process will be used to pay off debt;
- within three years, a citizen will not be able to occupy any leadership positions in various organizations;
- Repeated insolvency procedure is prohibited for the next 5 years;
- credit history worsens significantly;
- if a citizen applies to any banks for credit for 5 years, then he needs to notify employees of the institution that he has been declared bankrupt.
Therefore, sureties should seriously consider whether it is worth signing a surety agreement, since if the debtor for various reasons cannot manage its credit load, then the citizen will have to face many negative consequences.
Features of the procedure
Surety in case of bankruptcy of a debtor of an individual is a risky process. The law clearly establishes the rules on the basis of which the surety can be held liable for the debtor. The main features of the process include:
- in judicial practice, there have been cases when guarantors have canceled or terminated the guarantee agreement, but there must be good reason for this, for example, this is possible if the document contains clauses that violate the requirements of the law;
- usually the courts side with the banks, therefore, such claims are considered as a way to avoid the need to repay the debt;
- the guarantee agreement clearly states that the citizen acts as the guarantor of the transaction, therefore if for various reasons the debtor is unable to pay off the debt, then this obligation passes to another participant in the transaction;
- cancellation occurs when fraudulent schemes or fraudulent signatures are identified.
Sureties take significant risks when signing an agreement, so before you put your signature, you should think carefully.
How does a surety declare bankrupt?
Most often in a situation where the obligation to repay the debt passes to the guarantor, this citizen decides to declare himself bankrupt, as he does not have the means to fulfill the obligations. The procedure is performed according to the standard scheme, therefore, the sequential steps are carried out:
- initially, a citizen files a lawsuit to declare himself insolvent;
- the arbitration tribunal decides on the restructuring of the debt, but if there is no possibility for the guarantor to pay off the debt, then direct bankruptcy proceedings involving the sale of its property begin;
- bankruptcy proceedings involve the involvement of a special manager engaged in the inventory and direct sale of liquid assets;
- proceeds from the auction are sent to the creditor to repay the debt;
- if outstanding claims remain, they are canceled, and the surety is declared bankrupt.
At any time between the debtor and the creditor may be an amicable agreement. A surety who has become bankrupt may require the direct debtor to return all the money spent. For this, a lawsuit is filed with the court, after which the surety is included in the list of creditors. But even these debts can be canceled at the end of the insolvency proceeding.
A surety can be not only a citizen, but also a company. The nuances of this process include the fact that if the company is represented by LLC, then it can self-destruct at any time. Therefore, the bank does not have the ability to recover funds. This leads to the fact that lenders are negative when different organizations act as guarantors.
Conclusion
Guarantors in case of bankruptcy of the debtor must repay debts for the borrower. They have several options for solving the problem, so they can pay off the debt, declare bankruptcy or try to terminate the contract of guarantee.
If the debt is repaid by the guarantor, he has the opportunity to apply to the court with a lawsuit, on the basis of which the funds are returned forcibly by the direct debtor. The surety becomes the creditor, therefore its requirements are included in the register.