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Personal Guarantees: Reaching a Settlement: 1. Bank/organisation influences

When trying to settle a Personal Guarantee there are a number of factors that influence the ease and speed at which a deal is reached. 

In this article we consider those issues that influence the bank or organisation chasing the debt.

It is important to remember that most banks/organisations genuinely want to reach a deal and very few will pursue a person or business to bankruptcy. It is, nevertheless, crucial to identify the position and attitude of the bank or organisation in question as early as possible in order to avoid wasting time if they do exhibit the rare attitude of resisting settlement. That being said, there are a number of prominent factors which impact how banks/organisations approach negotiation. For example, do they have a policy on debt collection? While some will automatically refer this work out to external agencies or solicitors, many banks have internal debt collection departments. In some cases more than one such department exists, breeding competition that may influence negotiation.  

Further, one should consider whether or not the organisation has a charge on a property that backs the personal guarantee, the extent to which they want to clear the debt from their records and any policies they have that limit the settlement sums they are willing to accept. Organisations that are more aggressive will use court processes to reach their desired settlement and often at an early stage. 

All of these factors will greatly affect their attitude to negotiation and eventual settlement.   

Other market and regulatory factors can effect the organisation chasing a personal guarantee debt. The pre-2008 banking misdemeanours continue to exert an effect on personal guarantee claims emerging from that time. EFG loan rules, termination fees applying to Asset based and Invoice Finance agreements and security documentation backing guarantees all influence the outcome of negotiations. 

The legal system also influences organisations in this regard, encouraging the use of other means of achieving settlement other than the court process and have, in this regard, introduced a debt collection pre-action protocol in 2017 along with an astronomical increase in court fees in 2015 for those still choosing to use that method to make a claim.

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