What Is a Personal Guarantee?

According to the guarantee law, the third party and the creditor agree that when the debtor fails to perform the debt, the guarantor performs the debt or assumes responsibility in accordance with the agreement. The third party here is the guarantor, including a legal person, other organization, or a citizen with the ability to pay the debt on his behalf.

guarantor

According to the guarantee law, the third party and the creditor have agreed that when the debtor does not perform the debt, the guarantor shall perform the debt or bear the liability in accordance with the agreement.
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First, legal persons, other organizations or citizens with the ability to pay debts on their behalf may act as guarantors. However, if a legal person, other organization, or natural person who does not have the ability to make full compensation has entered into a guarantee contract as a guarantor and claims that he has no liability for compensation, the people's court will not support it.
Second, according to the relevant provisions of the General Principles of the Civil Law, individual industrial and commercial households and rural contracted households are a special form of citizenship. Therefore, the citizen as a guarantor can also be an individual industrial and commercial household, or a rural contractor.
Third, those who can act as guarantors include: sole proprietorships and partnerships registered for business licenses in accordance with law; affiliates registered for business licenses in accordance with law; Chinese-foreign cooperative ventures in which business licenses are obtained in accordance with law; social groups approved by civil affairs departments; Township, sub-district, and village-run enterprises that have been approved to register for business licenses.
Fourth, if a branch of an enterprise legal person provides a guarantee without the written authorization of the legal person, the guarantee contract is invalid. Where the functional department of an enterprise legal person provides a guarantee, the guarantee contract is invalid.
Fifth, public institutions and social organizations must not act as guarantors. Where a public institution or social organization engaged in business activities is the guarantor, if there are no other circumstances that invalidate the guarantee contract, the guarantee contract signed by it shall be deemed valid.
Sixth, state agencies can act as guarantors in the process of accepting loans from foreign governments or international economic organizations and after approval by the State Council. In other cases it is not allowed to act as a guarantor.
Therefore, before agreeing to act as a guarantor, you must understand the following possible consequences.
a) You may be charged.
If the borrower defaults on debt, the bank or financial company will sue you.
b) You may be sentenced to bankruptcy.
If the debt exceeds RMB30,000, you may be sentenced to bankruptcy.
c) multiple guarantors are not safe.
Don't assume that you have multiple guarantors and you feel safe. Debt is not necessarily borne evenly by multiple guarantors. Banks also do not have to choose to collect debt from richer guarantors. The lender has the option to collect debt from all or one of the guarantors.
d) Death does not represent a waiver of warranty.
It depends on what kind of guarantee. In the case of joint guarantees involving multiple guarantees, after the death of the guarantor, his estate can still be used to repay debts. However, if it is only a joint guarantee, its estate does not need to be used to pay off debts.
Liability and rights of guarantor
Who can be a guarantor?
Be over 18 and not bankrupt.
Can the guarantor opt out later?
This is up to the financial institution. It may require the guarantor to repay the debt and terminate the contract. It may also ask for a new guarantor to take over. It may not even allow the original guarantor to withdraw.
When can a guarantor withdraw?
When the loan has been paid off. However, if the borrower dies, you have to pay his debts.
What is the right to be a guarantor?
Based on the central bank guidelines, the guarantor has the following rights:
* Can hold a guarantee contract and other relevant certificates.
* As long as the borrower agrees, you can know the amount of loans from financial institutions.
* Can sue borrowers to pay debts owed to financial companies for the former. The guarantor usually receives a copy of the debt to the borrower.
* Can be limited to guarantee only one specific loan. If the borrower wants to increase the loan amount after a few years, he must make a new loan application, and at least he must obtain the written consent of the guarantor to guarantee the new loan.
* Unless the borrower defaults and does not repay the loan, the financial institution can recover the debt from the guarantor.
* Financial institutions must send a letter of repayment request to the guarantor before they can collect debt from the latter.
(Note: All guarantors should be informed of the above rights, regardless of whether the rights are in accordance with the Bankruptcy Act 1967 or the Central Bank's Guide to Accepting Loan Guarantees by Lending Institutions.)
Who will be charged by the bank?
If the borrower defaults and does not repay the loan, who will the bank recover the debt from-the borrower or guarantor?
Banks do not have to collect debt from borrowers first. Banks have the option to take legal action against the borrower or guarantor first. It can even recover debt from both parties at the same time.
Legal action can only be taken against the guarantor through legal means (after filing a complaint in the court and recovering debts from the borrower).
Under the Bankruptcy Act 1967, a financial institution may cause a borrower responsible for more than RM30,000 to declare bankruptcy. The same is true for a guarantor, unless he is a "social guarantor".
A financial institution can only sue a "social guarantor" and demand bankruptcy after it has exhausted all channels to collect debts from the borrower.
Under the above-mentioned decree, "social guarantor" means a person who guarantees the following loans.
* Home loan
* Educational or academic research awards, grant loans
* Loan for installment payment of private transportation
Guarantee contract and guarantee method
1 The guarantor and the creditor may conclude a guarantee contract separately for a single main contract, or they may agree to conclude a guarantee contract for a loan contract or a certain commodity transaction contract that occurs continuously within a certain period within the maximum credit limit.
2 The guarantee contract should include the following:
(1) the type and amount of the main creditor's right guaranteed;
(2) the time limit for the debtor to perform the debt;
(3) Ways of guarantee;
(4) the scope of the guarantee;
(5) Guarantee period;
(6) Other matters that both parties think need to be agreed.
If it is guaranteed that the contract does not fully contain the provisions of the preceding paragraph, it may be supplemented.
3 Ways of guarantee are:
(1) General guarantees;
(2) Joint and several liability guarantees.
The parties stipulated in the guarantee contract that when the debtor is unable to perform the debt, the guarantor assumes the liability for the guarantee, which is a general guarantee.
The guarantor of a general guarantee may refuse to assume the responsibility of guarantee to the creditor before the main contract dispute has not been tried or arbitrated, and the debtor's property has not been able to perform the debt according to law enforcement.
Under any of the following circumstances, the guarantor shall not exercise the rights specified in the preceding paragraph:
(1) The debtor's domicile has changed, causing the creditor to require him to have major difficulties in fulfilling his debt;
(2) The people's court accepts the debtor's bankruptcy case and suspends the enforcement procedures;
(3) The guarantor waives the rights provided in the preceding paragraph in writing.
Where the parties stipulate in the guarantee contract that the guarantor and the debtor are jointly and severally liable for the debt, the joint and several liability is guaranteed.
If the debtor of joint and several liability guarantees fails to perform the debt at the expiry of the debt performance period stipulated in the main contract, the creditor may require the debtor to perform the debt, or it may require the guarantor to assume the guarantee responsibility within the scope of its guarantee
If the parties have not agreed on the method of guarantee or the agreement is not clear, they shall bear the guarantee responsibility in accordance with joint liability guarantee.
The guarantor of the general guarantee and joint and several liability guarantees enjoys the right of defense of the debtor. If the debtor waives the right to defend against debts, the guarantor still has the right to defend.
The right of defense means that when the creditor exercises the creditor's right, the debtor shall
Guarantee liability
Guarantee Law Provisions
Article 21
The scope of the guarantee includes the main claims and interest, liquidated damages, damages, and the cost of realizing the claims. If there is another agreement in the guarantee contract, the agreement shall be followed.
If the parties have no agreement on the scope of the guarantee or the agreement is not clear, the guarantor shall be liable for all debts.
Article 22
During the guarantee period, if the creditor transfers the main creditor's right to a third party in accordance with the law, the guarantor will continue to assume the guarantee responsibility within the scope of the original guarantee. If there is another agreement in the guarantee contract, the agreement shall be followed.
Article 23
During the guarantee period, if the creditor permits the debtor to transfer the debt, it shall obtain the written consent of the guarantor, and the guarantor shall no longer bear the guarantee responsibility for the debt transferred without its consent.
Article 24
Where the creditor and the debtor agree to change the master contract, the written consent of the guarantor shall be obtained. Without the written consent of the guarantor, the guarantor will no longer bear the responsibility of guarantee. If there is another agreement in the guarantee contract, the agreement shall be followed.
Article 25
If the guarantor and creditor of the general guarantee have not agreed on the guarantee period, the guarantee period shall be six months from the date on which the main debt performance period expires.
During the guarantee period stipulated in the contract and the guarantee period stipulated in the preceding paragraph, if the creditor has not instituted a lawsuit against the debtor or applied for arbitration, the guarantor shall be exempted from the guarantee liability; if the creditor has initiated a lawsuit or applied for arbitration, the provisions of the limitation period of litigation shall apply.
Article 26
If the guarantor and the creditor of joint and several liability guarantees have not agreed on the guarantee period, the creditor has the right to require the guarantor to assume the guarantee responsibility within six months from the date on which the debt performance period expires.
If the creditor does not require the guarantor to assume the guaranty liability during the guaranty period stipulated in the contract and the guaranty period specified in the preceding paragraph, the guarantor shall be exempted from the guaranty liability.
Article 27
The guarantor guarantees consecutive claims in accordance with the provisions of Article 14 of this Law. If the guarantor period is not agreed, the guarantor may at any time notify the creditor in writing to terminate the guarantee contract, but the guarantor bears the guarantee responsibility for the claims that occurred before the creditor was notified.
Article 28
Where the same creditor's right has both a security and a physical security, the guarantor bears the guarantee responsibility for the creditor's rights other than the physical security.
If the creditor waives the security of the property, the guarantor shall be exempted from the guarantee responsibility to the extent that the creditor waives the right.
Article 29
If a branch of an enterprise legal person enters into a guarantee contract with a creditor without the written authorization of the legal person or exceeding the scope of authorization, the contract is invalid or the part beyond the scope of authorization is invalid. If the creditor and the enterprise legal person are at fault, they shall bear their respective civil liabilities accordingly If the creditor has no fault, the corporate legal person shall bear civil liability.
Article 30 Under any of the following circumstances, the guarantor shall not bear civil liability:
(1) The parties to the main contract colluded to trick the guarantor into providing a guarantee;
(2) The creditor of the main contract adopts fraud, intimidation and other means to enable the guarantor to provide a guarantee against the true intention.
Article 31 After the guarantor assumes the guaranty liability, he has the right to recover from the debtor.
Article 32
After the people's court accepts the debtor's bankruptcy case, if the creditor fails to declare the creditor's right, the guarantor can participate in the distribution of bankruptcy property and exercise the right of recovery in advance.

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