Overdraft Guarantee

[rachel norris]

Hi everyone

I have a client that is going through liquidation

They had an overdraft facility with Barclays signed in 2021 for £25k and guaranteed by elderly parents
Due to trading issues the bank withdrew the facility in 2022 which contributed to the business struggling and they eventually stopped trading in late 2022
However to their credit they settled all finance. Loans and the overdraft along with all creditors and kept up all their BBL payments.
Until this year when they really struggled the account fell into £2000 overdrawn as the bank was taking BBL payments even though no arrangement in place!
So now in liquidation and barclays today sent both guarantors letter demanding immediate payment of the £2k overdraft.
My question is they terminated that facility and with it the guarantee...... or does the guarantee not expire with the facility?

 

[Frank Wessely]

Hi @rachel norris

Based on the narrative I think that unless the guarantees were released when the facility was withdrawn they remain in place and the elderly parents are liable to pay the 2k. The Bank’s position would be that sufficient funds should have been deposited to cover the BBL repayments.

That being said you have a case to put to the Bank that they should have released the guarantees in 2022 and it was their responsibility to do so. After all, without a facility why would guarantees still be required?

If that does not work you could file a complaint with the Bank / the Ombudsman.

Failing that you could make a nominal offer of settlement on behalf of your elderly clients to draw matters to a close.

I hope that this helps.

 

[Frank Wessely]

I should also say that my above post assumed that there will be no dividend to creditors in the liquidation process.

Thanks.

 

[rachel norris]

Thank you so much

 

[Elliot Green]

Hi everyone

I have a client that is going through liquidation

They had an overdraft facility with Barclays signed in 2021 for £25k and guaranteed by elderly parents
Due to trading issues the bank withdrew the facility in 2022 which contributed to the business struggling and they eventually stopped trading in late 2022
However to their credit they settled all finance. Loans and the overdraft along with all creditors and kept up all their BBL payments.
Until this year when they really struggled the account fell into £2000 overdrawn as the bank was taking BBL payments even though no arrangement in place!
So now in liquidation and barclays today sent both guarantors letter demanding immediate payment of the £2k overdraft.
My question is they terminated that facility and with it the guarantee...... or does the guarantee not expire with the facility?

Perhaps something to consider is the fact that the BBL is not usually something someone can be personally liable for - at least not contractually. As a result, if the PGs were calling in sums due in respect of repayment of the BBL then that might be an issue to take up with the bank.