Personal guarantee settlement model
When a company fails and you personally guaranteed one of its debts, the creditor can pursue you for the shortfall, up to any limit in the guarantee. Settling means offering less than the claim, and the strongest reason a creditor has to accept is that bankrupting you would net it less. A creditor's bankruptcy petition triggers statutory fees before any creditor is paid: a £3,300 administration fee, a £7,200 general fee and 15% of what the official receiver realises as trustee, with what is left shared with your other creditors over up to three years. Enter your figures below to see the claim, the creditor's bankruptcy alternative and how your offer compares. Download the spreadsheet version to keep working on it. Insolvency Proceedings (Fees) Order 2016, Sch 1
Model your settlement
One guarantee at a time. If you have several, the exposure checker adds them up first. Use 0 where something does not apply.
Worked example: the starting figures are illustrative, not typical of any real case. Replace them with your own. How it works: the claim is what the company owes this creditor, less what the creditor recovers from the company, plus any interest and costs the guarantee covers, capped at any limit in the guarantee. The bankruptcy estimate adds home equity over £1,000, saleable assets and up to 36 months of spare income, then deducts the Insolvency Service's statutory fees where the official receiver is trustee on a creditor's petition, plus the petitioning creditor's costs, and shares what is left pro rata between this claim and your other unsecured debts. It assumes a bankruptcy in England and Wales, all your figures are right, and nothing else reaches the estate. It ignores secured creditors, a partner's claim on the home, a private trustee's fees (which are set differently), claims a trustee might bring over earlier transactions, and the time the creditor waits for its money.
Sources: Insolvency Proceedings (Fees) Order 2016, Sch 1 and art 2 and art 4, GOV.UK: apply to bankrupt someone, GOV.UK: becoming bankrupt, GOV.UK: statutory demands, checked 24 September 2026.
Take the model with you
The spreadsheet runs the same calculation with live formulas, so you can try different offers, keep versions for each guarantee, and show your working to an adviser. It has a how-to sheet, the options and trade-offs table below, and the sources for every statutory figure.
Worked example in full
A director personally guaranteed a bank loan, with the guarantee capped at £50,000. The company has gone into liquidation owing the bank £60,000, and the bank expects £6,000 back from the company. The director owns a home with £40,000 of equity in their share, has £5,000 of savings and £300 a month of spare income, and owes £10,000 on cards and a personal loan. They can raise £25,000 now by remortgaging and pay £250 a month for two years.
What the bank can claim
| Step | Amount | Note |
|---|---|---|
| Owed by the company to the bank | £60,000 | The loan balance you guaranteed |
| Less: what the bank recovers from the company | -£6,000 | Its security and its dividend in the liquidation |
| Plus: interest and costs the guarantee covers | £2,000 | Only because this guarantee's wording allows it |
| Shortfall | £56,000 | |
| Claim under the guarantee | £50,000 | Capped at the £50,000 limit written into the guarantee |
What the bank would net by making the director bankrupt
| Step | Amount | Note |
|---|---|---|
| Home equity (your share, net of mortgage and selling costs) | £40,000 | Over £1,000, so a trustee deals with it |
| Savings and other saleable assets | £5,000 | |
| Income payments: £300 a month for 36 months | £10,800 | Up to 3 years |
| Total the trustee realises | £55,800 | Also what bankruptcy costs you in money |
| Less: official receiver's administration fee | -£3,300 | Creditor's petition |
| Less: official receiver's general fee | -£7,200 | |
| Less: trustee fee at 15% of what is realised | -£8,370 | |
| Less: income payments agreement fee | -£150 | |
| Less: petitioning creditor's court fee | -£352 | No legal costs assumed |
| Left for all unsecured creditors | £36,428 | Shared between the £50,000 guarantee claim and £10,000 of other debts |
| The bank's share | £30,357 | 60.7p in the £ of its claim |
The offer against both
The offer totals £31,000: £25,000 now and 24 payments of £250. That is 62p in the £ of the £50,000 claim. It is £643 more than the £30,357 the bank would net from a bankruptcy, and it arrives sooner: in a bankruptcy the bank would wait for the home to be dealt with and for three years of income payments. For the director it is £24,800 less than the £55,800 bankruptcy would take from them, before counting what bankruptcy does to their ability to run a company.
Two things would change the picture. If the director had £30,000 of other debts instead of £10,000, the bank's bankruptcy share would fall to £22,768, making the same offer more attractive. If the home had no equity, the bank would net £2,023 and a much smaller offer would still beat bankruptcy.
The statutory figures behind the bankruptcy estimate
| Fee or threshold | Amount | Source |
|---|---|---|
| Official receiver's administration fee, bankruptcy on a creditor's petition | £3,300 | Fees Order 2016, Sch 1 |
| Official receiver's general fee | £7,200 | Fees Order 2016, Sch 1 |
| Trustee fee when the official receiver is trustee | 15% | Of chargeable receipts. Fees Order 2016, Sch 1 |
| Income payments agreement fee (or income payments order) | £150 | Fees Order 2016, Sch 1 |
| Petition deposit, paid by the creditor | £1,500 | Security for the administration fee, not an extra cost. Fees Order 2016, arts 2 and 4 |
| Court fee, paid by the creditor | £352 | GOV.UK, apply to bankrupt someone |
| Minimum debt for a creditor's bankruptcy petition | £5,000 | GOV.UK, apply to bankrupt someone |
| Home equity at or below which a trustee does not deal with the home | £1,000 | GOV.UK, becoming bankrupt |
These are the Insolvency Service's own fees when the official receiver acts as trustee, which is the usual position. Creditors can appoint a private insolvency practitioner as trustee instead, who is paid on a different basis. The deposit is not an extra cost: it secures the administration fee and goes back to the creditor if the estate pays that fee.
Options and trade-offs
| Route | What it involves | In your favour | Against it |
|---|---|---|---|
| Pay the claim in full | Pay what the guarantee allows the creditor to claim. | Ends it. No bankruptcy, no restrictions. | Can be more than the creditor would recover any other way. |
| Negotiated lump-sum settlement | A single payment in full and final settlement, in return for a written release of the guarantee. | Certainty for both sides. Money from a third party can fund it. No public record. | Needs cash now. Must be documented properly: a release that names the guarantee, and what happens to any co-guarantor. |
| Settlement by instalments | An agreed total paid monthly, often with a lump sum up front. | Spreads the cost. Can match what a trustee would take from income anyway. | Check what happens if you miss a payment: some agreements revive the full claim. |
| Individual voluntary arrangement (IVA) | A formal deal with all your creditors, set up by an insolvency practitioner. It starts if creditors holding 75% of your debts agree, and then binds all of them. | Deals with every personal debt at once and avoids bankruptcy and its restrictions. | Set-up and handling fees. Recorded on the Individual Insolvency Register. Fails if you cannot keep up the payments. |
| Let the creditor petition for bankruptcy | A statutory demand first, then a petition if the debt is £5,000 or more and still unpaid or unagreed after 21 days. | Most debts end on discharge, usually after 12 months. | Home equity over £1,000 and other assets can be sold, income payments for up to 3 years, no acting as a company director without the court's permission, and 6 years on your credit file. |
| Challenge the guarantee | Test whether it is valid and what it covers: how it was signed, whether the lender changed the deal without your consent, caps, expiry and release clauses. | Can reduce or remove the claim, and strengthens your hand in any negotiation. | Legal costs, and the claim can grow while it runs. Needs specialist advice on the actual document. |
Before any of these, find out exactly what you signed. The personal guarantees guide covers the recognised grounds for challenging a guarantee and when a lender actually calls one in. If the company's position is still open, the creditor dividend estimator shows how much a secured lender is likely to recover from the company, which is the recovery figure this model needs.
Common questions
How much should I offer to settle a personal guarantee?
There is no official percentage, and anyone quoting a standard figure is guessing. What gives an offer weight is the creditor's alternative. If it would net less from making you bankrupt, after the statutory fees and after sharing with your other creditors, and would wait up to three years for it, an offer at or above that figure gives it a reason to settle. This model works that figure out from your own numbers.
Can a creditor make me bankrupt over a personal guarantee?
Yes, if the amount it can claim from you is £5,000 or more. It would normally serve a statutory demand first. You then have 21 days to pay or reach an agreement, and 18 days to apply to court to set the demand aside if you dispute it. After that it can petition. The petition costs it a £1,500 deposit and a £352 court fee up front.
Can I stay a company director if I am made bankrupt?
Not without the court's permission. A bankrupt cannot act as a director of a company, or create, manage or promote a limited company, without it. For a director who wants to keep running or start another business, that restriction is often a bigger cost than the money, and it is one of the main reasons to settle.
Does the lender have to wait for the liquidation to finish before chasing me?
It depends on the wording. Guarantees commonly include a clause letting the lender demand payment from you without first pursuing the company. The model deducts what the lender expects to recover from the company because that is what it will weigh when it considers your offer, not because you are necessarily entitled to that deduction. Check your guarantee.
What if other directors signed the same guarantee?
Where a guarantee signed by more than one person is joint and several, which is common, the creditor can pursue any one of you for the whole amount and leave that person to claim contributions from the others. The model shows an equal share for information, but a settlement should say in writing whether it releases you alone or everyone who signed.
What should a settlement agreement say?
At the least: the amount and dates of payment, that it is in full and final settlement of your liability under a named guarantee, that the creditor releases the guarantee once it is paid, whether it covers any co-guarantors, and what happens if a payment is missed. Get it in writing, signed by the creditor, before you pay anything.
Not sure which route fits?
Tell us briefly what’s happening. It is free and confidential. We do not offer a call-back; we reply by email when we can.
Send my situation, free and confidential
Free and no obligation. We are an independent information service. Getting in touch does not appoint an insolvency practitioner or create a professional engagement. This is general information, not regulated advice.