I GAVE A PERSONAL GUARANTEE” – aka their debt is now my debt
Fri Jun 05 2026
“I signed it because I couldn’t get my business started otherwise”
“My family needed my help, so I signed a guarantee to support them”
Personal Guarantees are a standard commercial practice in New Zealand business finance, so much so they are generally accepted without question.
Especially for a new business, it can be nigh on impossible to secure loans, trade supply or commercial leases without a personal guarantee to act as a backstop to the liabilities of the new business. The fact that they are such an integral part of business financing means that many people simply accept them as a necessary evil without fully questioning or understanding the extent of liability that guarantee exposes them to.
But sometimes it’s family that ask for help, for a loan or to get a tenancy, and saying no to family can be very hard indeed.
“What did I sign?”
A personal guarantee is a legally binding promise made by an individual (the guarantor) to take personal responsibility for the debt or obligations of another party (the principal debtor).
A guarantee must be in writing, must set out the core obligations of the guarantee and must be signed by the guarantor.
In practical terms, a personal guarantee means that if the original debtor fails to meet their obligations, the creditor can turn to the guarantor to meet their obligations
“It’s OK, it was just the small start-up loan”
Personal guarantees can be for specific, limited amounts, or they can be ‘All Obligations’ guarantees.
An ‘All Obligations’ guarantee means that you are liable not only for the initial debt but also any and all subsequent debts with that creditor, plus interest and costs.
The written personal guarantee should set out clearly what the personal guarantee covers.
“But they can’t touch my house, can they?”
Most commonly, ALL personal assets of a guarantor are available to the creditor seeking satisfaction of the debtor’s obligations. So yes, your home may be vulnerable if you have given personal guarantees.
“But I only pay what the business/my family can’t, right?”
Many guarantees will allow the creditor to go straight to the guarantor for repayment, rather than waste time and money trying to get payment out of a defaulting debtor. This will be set out in the guarantee itself.
So you will be legally obligated to satisfy the full amount owing, plus interest and costs. It will then be up to you to try and claw back what you can from the debtor, if anything.
“No one told me I should get legal advice before signing – does that mean it’s not valid?”
No, there is no legal requirement for a guarantor to receive independent legal advice, so you are still bound. Many lenders will require you to sign an acknowledgement that you were told to get independent legal advice, but that acknowledgement is for their protection and giving the guarantee is a choice you make.
“But I already signed it! What do I do now!”
Knowledge is power. Your first step is identifying any personal guarantees you may have signed – common examples will be finance documents for a business, family or friends, trade supply agreement or leases/tenancy agreements.
Read them over and take note of the extent of your obligations under the guarantee – is it all obligations or a specified amount? Does it state that they can seek remedy from you directly without first pursuing the primary debtor?
Reach out to us if you do not understand the guarantees, or if you are worried the guarantees carry higher risk than you had realized or can manage - we can help you understand the extent of your exposure under the guarantees and look for ways to reduce or limit your personal risk.
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