Deceased Loan Guarantor

D

Dublin82015

Registered User
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Hi All,

Just looking for some views on a particular situation.

Deceased passed away 8 years ago. A couple of years prior to that the deceased would have sold his business to another director.

It appears that the deceased was a personal guarantor on a loan that was either in the name of company or the other director. Not sure of which.

The bank in question have recently sent a letter addressed to the Representatives of the deceased estate looking for full payment within 7 days. The loan is now in default.

It's the First correspondence that has been sent to the representatives of the estate in relation to this matter.

It's a large amount which has caused massive stress to those involved as they were unaware of any loan until this letter arrived.

Does anyone have any experience of this situation?

They're taking legal advice at the earliest opportunity but would appreciate any opinions.

Thanks.
 
That is a really strange predicament.

I know that the estate of a deceased is liable for their debts but in this case this liability is on foot of a guarantee. I wonder how the guarantee was worded. Isn't there a difference between a guarantee and an indemnity which differentiates the liability i.e. 1 makes it one step further removed from the liability.

I would've thought that the guarantee should've expired when the guarantor passed away.

If the assets of the deceased have been dispersed I would think there would be no liability (provided that when they were dispersed the executor could reasonably expect at the time that the guarantee wouldn't be called upon). the fact the loan didn't go into default for a further 7 years would suggest the company was in good standing and the guarantee wouldn't be called.

I would definitely check for any movement in the loan balance between when the guarantee was signed (the one their relying on) and the balance they're calling in now - any change to the T&C's or increase in balances can be used by the guarantor to object to the validity of the guarantee (may not remove the liability in full but can limit it).

I will note that often the Bank will copy the guarantor as a matter of course when they're calling in a loan. I'd call them and get their side of the story - get all the facts and copies of the documents their relying on. But most importantly get the legal advice your pursuing.
 
Apologies,

According to this legal summary, a guarantee will remain the liability of the estate until the Lender releases it

[broken link removed]
 
Dublin82015 said:
Many thanks for your reply. Much appreciated.
Click to expand...

No problem. Would be interested in hearing the outcome.

regardless of my 2nd post above, I still think there'd be no liability if the assets were dispersed 7 years ago when it was reasonable for the executor to think the gtee wouldn't be called.
 
As far as i know if the Notice to Creditors was published in the newspapers as required then the estate is no longer liable assuming no claim was then made. I dont know if the Statute of Limitations has relevance in this situation
 
Firstly, the personal representatives should not even acknowledge the correspondence until they have sought expert legal advice. Any professional advisor would need to see all related documentation before providing advice.

Even if all of the assets of the estate have been distributed, the bank could go after the beneficiaries if it has a valid claim. An advertisement for claims would have relieved the personal representatives from being personally sued by the bank, but would not relieve the beneficiaries.

The biggest issue is the Statute of Limitations. The bank would have the lesser of six years from the date of demand or two years from the date of death to issue proceedings against the estate, otherwise the bank's demand would be statute barred.

Some loan documents may provide that a non-payment constitutes a breach, meaning that a demand should have been made at that time. Accordingly, a careful review of the loan documentation may be required.

If the bank is not outside the Statute of Limitations, then the personal representatives will need to look at possible defences e,g, were there any major changes to the loan facilities in the last 8 years that prejudiced the guarantor etc.

Another issue to consider is why the deceased left such a large issue "hanging out there". What indemnities did he receive from the purchaser etc.

Jim Stafford
 
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In the event of a deceased party creditors must initiate action against the executors within a maximum period of 2 years. The guarantee would need to have been called in within this period!
 
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