Loan guarantee Surety Agreement
Now it is difficult to find a person who did not take a loan from a bank at least once in his life. But one thing - to buy home appliances in installments. And a completely different thing - to issue a guarantee. If the amount is large, the bank may ask for additional guarantees. Who to contact if there is a need to issue a loan guarantee? What responsibility is imposed on the parties to the transaction? Answers to these questions you will learn from this article.
Surety (Civil Code) - the obligation of one person to answer to the debtor's borrower for the latter to fulfill the conditions of the transaction. The need for such a guarantor often arises with long-term lending. Using the example of a mortgage, this means that the guarantor must return the money to the bank if the borrower cannot do it on his own. Taking on such responsibility, you need to be prepared for the consequences.
Why do I need a loan guarantee
The most interested person in this business is the bank. A credit institution reduces loan rates, a consumer can enter into a bargain, and an additional guarantee of a refund is provided by the guarantor. Although the law prescribes special benefits for such persons, their responsibility is also high.
A guarantee agreement is concluded between the bank and the guarantor. The written consent of the debtor is not required. Although in some cases, banks may ask for it.
The contract of guarantee includes the following items:
- the duty of the guarantor;
- the amount of responsibility of the guarantor;
- the size of the guarantee (the amount of the collateral object);
- rights, obligations and responsibilities of the parties.
Let us consider in more detail the most important of them.
Loan guarantee: responsibility
The guarantor and the co-borrower are not the same thing. In the second case, both parties to the contract equally divided the rights to the acquired property and obligations. The main difference lies in the maximum amount of the transaction that the bank will calculate on the total income of the debtor and co-borrower. Cash receipts guarantor to increase the credit "ceiling" can not, but their size should be higher than the monthly payments.
In mortgage lending often used jointly and severally liable.This means that the bank may require the performance of obligations with the borrower and the guarantor, and in full or partially. A credit institution may transfer responsibility to the guarantor. Contracts with subsidiary liability are less common. In this case, the right to recover the unpaid amount from the bank appears only if the borrower can not return it independently. First, the requirements are presented to the main debtor. At the same time, the bank is obliged to make sure that the borrower cannot repay the loan himself: collect all the evidence, obtain the relevant court decision, wait for a certain period and only after that contact the guarantor. The problem also lies in the fact that the principal debtor may disappear without a trace. Then it will be impossible to prove its insolvency. Claims against the guarantor disappear along with the debtor. Therefore, such agreements are extremely rare.
Rights and obligations of the guarantor
When the bank requests to repay the loan:
- as soon as the borrower stops paying;
- if the value of the debtor’s property is not enough to repay the loan;
- in case of death of the borrower.
The bank may require from the guarantor:
- pay the principal amount of the debt;
- to pay interest;
- pay fines, court fees.
Although the sponsor imposes a great responsibility on himself, he also has a number of rights. They are spelled out in Art. 365 of the Civil Code. The most important of them is that if the guarantor has fulfilled all the obligations, then he receives the rights of the creditor. That is, it may require the debtor to compensate him for all losses, including interest on the contract. In this case, the bank is obliged to submit to it all documents certifying the requirements for the borrower.
A loan guarantee is a big responsibility. Therefore, before you sign the contract, you need to carefully analyze your income and expenses. If the borrower evades his obligations, the bank "switches" to the guarantor. At first they try to collect the debt with money, then with movable and immovable property. But sometimes the sequence can change. For example, if the borrower took out a loan for a car, but he does not have his own home, then by a court decision, the bank will be able to collect the debt from the guarantor’s living space, if the latter does not have a car of equal value.
But if the apartment was purchased on a mortgage loan, and the guarantor does not have any other suitable property, the court will refuse the request. On the other hand, after the fulfillment of all obligations to the credit institution, the guarantor is entitled to claim compensation for material damage from the borrower, including in court. At the same time, the bank is obliged to transfer all documents to it and notify the debtor thereof.
Failure to fulfill obligations taken by the guarantor will put an end to the possibility of taking a loan in the future. Therefore, the decision must be approached very carefully. It is worth re-reading the contract several times in a relaxed atmosphere (a sample of the guarantee can be obtained from the bank’s employees for the period of the decision-making). It is necessary to evaluate not only the solvency of the debtor, but also its own. Taking a loan without collateral and a guarantee to a person who acts as a guarantor will be very difficult in the future.
How to escape
It is most difficult to shy away from obligations if the spouse acts as a guarantor. Even worse, if the guarantors are retired parents who currently do not work.There are only three ways out of this situation: to ask for debt restructuring, credit holidays, or to sell collateral. Most often, such issues are regulated through the courts. If the bank wins the case, the decision will be transferred to the state executive service. If the guarantor does not have a source of income, cars or housing, then in 6 months the GIS will return the order to the credit institution without execution. Repeated appeal may not bring results if the guarantor does not get a job or property.
To select all the money to the penny the bank will not allow the court. If the family has two minor children or disabled relatives who have filed for alimony, then up to 70% of the income can be spent on their maintenance. That is, it is perfectly legal to make the bank receive crumbs. But in such cases, a credit institution and collectors will try to find the "gray" income from the debtor.
Everything must be done on time
The bank may force the guarantor to repay the borrower's debt no later than six months after the termination of payments. At the same time, the credit institution is obliged to demand a refund in writing. Litigation can drag on for a long time.Usually this is the case: the borrower does not make payments for 2-3 months, it takes about 30 days to resolve the issue of credit holidays and debt restructuring. Even more time is spent on the transfer of cases to collectors and the “hunt” of the borrower. Therefore, after receiving an official letter from the bank, first ask when your partner made the last payment for a loan. There is a chance that the train has left, and the bank has no right to demand anything.
But if the court is still ...
Even if the demand came on time, you should not panic. Even bankers admit that the main purpose of the conversation with the guarantor is to psychologically influence him in order to make the borrower pay. In such cases, lawyers advise again carefully review the contract. Sometimes it is possible to legally oblige the bank to sign an additional agreement with the conditions required by the guarantor, referring to the fact that the old provisions contradict the law.
Fans of extreme sports may try to file a lawsuit on behalf of their relatives to declare the guarantor incapable. Then all disputes will be resolved in the presence of the board of trustees, which will not allow the taking of property from their "patient".But even if such extremals are found, the bank may require a forensic examination to confirm the diagnosis.
When does a guarantee stop?
The Civil Code provides for several reasons:
- The bank unilaterally made changes to the contract;
- the credit institution has not received the written consent of the guarantor;
- the limitation period has expired;
- the borrower, which is a legal entity, has been liquidated;
- the debtor is dead.
However, the obligations under the guarantee agreement may be inherited. But in this case there are concessions. Successors are obliged to repay the debt if its volume does not exceed the value of the property received.
By inheritance pass responsibilities:
- from civil contracts;
- for damages;
- compensation for non-pecuniary damage;
- for the payment of a penalty, fine or penalty;
- expenses for the burial of the testator.
Inheritance does not transfer duties from civil contracts, which could only be fulfilled by the testator.
The refusal of a loan guarantee can be initiated by the guarantor himself if he has doubts about the partner's solvency.In this case, you need to find another candidate, contact the bank and make annexes to the contracts. This will work if the borrower still fulfills his obligations. If the debtor does not want to re-sign the contract, then it can be terminated in court. Previously, the guarantor should re-register all property for relatives.
It is possible to challenge the loan guarantee in Ukraine (as well as in Russia) if:
- the bank applied later 180 days after the delay in payments;
- the guarantor is a family member, and the pledged property is joint;
- The guarantor did not personally sign the contract;
- the guarantor is an incompetent person;
- 70% of the income of the guarantor is sent to child support;
- The guarantor is unemployed and does not own property.
What about enterprises?
The loan guarantee of a legal entity provides only for joint liability of partners. To find such a guarantor is very difficult. Firstly, it must have a stable financial position in order to settle accounts with the bank, if necessary. Secondly, the guarantor should have a good credit history in the past. Most often, the guarantor in such cases is another legal entity. The guarantees, duties and procedure for signing documents are the same as for individuals.You must first obtain the written consent of the guarantor. Then submit the documents to the bank. It:
- application form;
- certificate of state registration;
- documents on the registration of the taxpayer;
- financial statements for the last year.
After all the formalities are settled, you can begin to sign the documents. In business, such a contract is used to secure obligations arising from a contract of sale.
The loan guarantee is governed by art. 361-367 of the Civil Code. But in practice, lawyers often have disputes about the legality of attracting a guarantor. According to Art. 361, the guarantor undertakes to the creditor of the debtor to be responsible for the performance of obligations in whole or in part. The contract is consensual. Obligations arise only from the guarantor. He cannot unilaterally abandon them, if it is not provided for in the document. If necessary, the guarantor is obliged to repay the principal debt, interest for its use, legal costs. The responsibility of the guarantor is of an additional nature, that is, it comes only if the debtor has not fulfilled its obligations.
One of the controversial issues - bringing the guarantor to responsibility after the elimination of the debtor. Example: a borrower - an organization that has not fulfilled its loan obligations, was declared bankrupt and liquidated. Does the guarantor have to answer to the bank? In court practice there are several times when the court has satisfied such requirements. But how justified is this decision?
According to Art. 419 of the Civil Code of the Russian Federation, with the liquidation of the organization, all its obligations cease. Claims to recover money from the guarantor cannot be satisfied by the court. Exceptions are cases when legal acts fulfill the obligation to another person (the requirement for compensation for harm caused to health or life).
The guarantor is not a joint and several debtor to the creditor. He is responsible for the fulfillment by the principal debtor of obligations in full or in part. Due to this accessory nature, the responsibility of the guarantor cannot exist separately from the main obligation. If it does not exist, then, in accordance with Art. 367 of the Civil Code of the Russian Federation, the guarantee also ceases.Therefore, the assertion that the guarantor remains indebted until the debt is paid is against the law.
From all the above, we can draw one conclusion: if there is a need for borrowed funds, then it is better to take out a loan without guarantors. Finding those who wish to risk all their possessions will be very difficult. And the guarantor’s responsibility is high. Such transactions are governed by the Civil Code. It spelled out the conditions of occurrence, the transfer of obligations and the consequences for their failure. You can refuse after signing the documents, but this will be very difficult. Therefore, if there is an opportunity, it is better to take a loan without guarantors.