Question

Jon,

I need some advice regarding a business loan I have with my brother. We both started a company as a partnership and borrowed £15,000 from our bank to start the company up. The bank required we both sign for the loan as guarantors. This was last year, right before Covid hit and we got locked down.

The lock down basically killed the company as we could not trade. When the lock down was lifted, we went back to trying to trade, but it has been slow and quiet.

Both my brother and I contributed to pay the loan, however, my brother has now stated he is not going to pay anything towards the loan and he no longer wants to be a partner in the business. This leaves just me to pay this loan and I really cannot afford to pay it. My wife is supporting me and the loan is a huge expense each month.

I need advice as to what I can do??

Gerry

Answer

Gerry,

I am sorry to hear of your situation, firstly how the pandemic hurt your new company, and the issue with your brother. Going into business and also borrowing money together with family can be a touchy and delicate thing.

As you both are guarantors for the loan, you are both equally responsible for the loan. The bank will seek out both of you to pay the loan.

If your brother refuses, the loan can fall on your shoulders, and depending on both your situations you do have options.

You can discuss this with the bank and seek out a modified or reduced payment arrangement. This could affect both your credit histories.

Depending on what other debts you or your brother have, separately or together, you could look at a debt management plan, or possibly a form of insolvency. These need to be considered carefully, and there can be many factors, such as having assets like property, that can make these options not viable.

There also is the question of are any of your other debts or assets in both you and your wife’s name?

As you can see, it can get complicated.

Should you or your brother enter into a form of insolvency, the loan will then become the sole responsibility of the other party.

If you can give me more details, we can look closer at this.

Regards,

Jon

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