Bankruptcy information please

[MamaBearThius]

Hi all
Please go gently on me as legal matters are not my forte
A very dear friend of mine is being forced into declaring bankruptcy due to their business failing and being in a lot of debt.
One loan that they took out was with Amigo and another friend was used as a guarantor.
What will happen to the Amigo debt when they declare bankruptcy? And would the guarantor be liable for anything?
Any other information would be useful also as I'm trying my best to support them emotionally

Your friend will no longer be liable for the Amigo debt. It is an unsecured debt which will be written off as part of the bankruptcy. However, bankruptcy only protects your friend. It does not protect the guarantor. The guarantor will be liable for the loan and will either have to meet the ongoing payments or pay it off in full.

It is unlikely your friend will be able to continue paying the loan themselves when they are bankrupt as any surplus income must go to the Official Receiver. Paying off the debt before going bankrupt is unlikely to work even if they can afford it as your friend is not allowed to give any of their creditors preferential treatment. If your friend did pay off this loan the official receiver could force Amigo to return the money, so the guarantor would still be liable.

Thank you so much for such a detailed answer. Guarantor friend has no idea of the upcoming bankruptcy, it's all such a mess

If they haven't already obtained advice they should. There are other options including IVA or informal debt management. Step change are very good at this and the advice is free.

There is nothing to stop.your friend from making amends to the guarantor when he's/she's free from bankruptcy and on a more stable financial footing.

Thank you so much for the advice. I'm seeing her tomorrow so will pass all of this along. I think the first step needs to be to tell the guarantor what's going on. What will life be like once bankruptcy is declared? As they live above their business currently and will have nothing to their name

They may well feel better off as there will be no debt payments unless they are earning enough as deemed by the trustee once their essential expenses have been assessed.

I'm hoping they will be entitled to benefits as neither of them are in very good health, one significantly worse than the other. The years they've been running the business have really taken its toll. They've not a penny to their name so I worry about where they will live and how they'll manage. I can help so much but it's a difficult situation