Guarantee free of charge: can we still obtain discharge after the debtor’s bankruptcy is closed?

Imagine: you stood as guarantor, out of generosity, to help a close entrepreneur or a company in difficulty. But now, the debtor falls into bankruptcy.Are you stuck paying a debt that is not yours, sometimes for years?

Not necessarily. Belgian law offers specific protection to guarantors free of charge, allowing them, under conditions, to request a total or partial discharge of their commitment.But be careful: this possibility is not eternal.

We regularly support guarantors facing the bankruptcy of the principal debtor. Our experience shows that many people are unaware of the existence of this right to discharge, or act too late. Here’s what you need to know.

A legal ax called “bankruptcy closure”

Article XX.176 of the Code of Economic Law allows the free guarantor to request discharge if his commitment was manifestly disproportionate to his ability to repay at the time of bankruptcy.But this right is limited in time: it must be exercised before the procedure is closed.

Concretely, this means that once the bankruptcy case is closed by the court, the guarantor loses any possibility of benefiting from this protective regime.Even if all the substantive conditions are met (gratuity, disproportion), the request will be judged inadmissible because the court will have lost its jurisdiction. 

Act quickly to avoid financial disaster

Direct consequence for the surety: if he has not reacted in time, he becomes an ordinary debtor again, fully exposed to the creditor’s proceedings. Seizures of movable or real estate, seizure of wages, etc.All means of forced execution become possible again, without the “filter” of the bankruptcy judge.

In addition, the amount claimed risks exploding. Because by losing the protection of article XX.176, the guarantor will also have to pay often very high interest (up to 12.5% ​​per year), contractual compensation and bailiffs’ and lawyers’ fees.The debt can thus double or triple compared to the initial amount, pushing the guarantor into over-indebtedness.

Our advice: quickly build a solid file

As soon as the bankruptcy is announced, the guarantor must contact a lawyer specializing in security and insolvency law.At Maître Twagiramungu, we advise collecting without delay all the documents proving:

• the free nature of the bond (certificate of non-remuneration, sworn declaration, etc.),
• the manifest disproportion of the commitment with regard to your income and expenses,
• your good faith and the absence of fraudulent intent.

A quantified comparison between your contributory abilities and the guaranteed amount is essential.Do not wait to be contacted by the curator: send him an official letter announcing your intention to file a request for discharge.This will prove your responsiveness.

What if the bankruptcy is already closed?

All is not lost. Certainly, the “classic” landfill is no longer possible. But a creative and combative lawyer still has levers to reduce the debt:

• request judicial moderation of clearly excessive penalty or interest clauses,
• invoke non-compliance with contractual good faith if the creditor abuses his rights,
• require proof of the resale of the financed asset and the offsetting of its proceeds against the debt.

In practice, 8 out of 10 cases are settled by a transaction negotiated by the lawyer, allowing the guarantor to avoid ruin.The main thing is to get good advice, and not to remain passive.

Personalized support from your lawyer in Brussels

At the Brussels United Lawyers firm,Maître Twagiramungu makes it a point of honor to defend good faith guarantors trapped in bankruptcy.Present daily before the company’s courts, he knows how to demonstrate responsiveness, combativeness and creativity to find the most protective solution for his clients.

Don’t wait until you’re cornered. If your company or a loved one is in difficulty,contact Maître Twagiramungu quickly to take stock of your bond.A frank and transparent conversation can save you a lot of trouble and even ruin. Our firm is there to defend your interests, in a confidential and caring environment.