Sale of Family Home to cover Personal Guarantees STOPPED!
In a recent court judgement, a financial institution was denied the right to seek the sale of a family home in order to pay off loans secured by a personal guarantee (PG).
The borrower had given a PG to a Credit Union for a property development loan which then went bad. The development was sold and the credit union then registered a judgement against the borrower for the balance of the loan outstanding. The credit union then registered a judgement mortgage against his family home. The credit union then requested the court to give it permission to force the sale of the borrower’s family home to liquidate the borrower’s equity in the family home in order to repay some of the outstanding debts.
The borrower’s wife did not give any guarantee or was not party to any of the loans in question.
The court held that though the credit union was entitled to get the judgement mortgage it was not entitled to have the home sold as it would leave the borrower’s wife in a position that she would suffer significantly and possibly be left homeless. Since she had no part in the loan or never gave any consent to the family home being used as security for any loan the home could not be sold.
Judge Gerard Hogan, giving the three judge court’s unanimous judgment, found the home could not be sold because the wife of the borrower was not parity to the relevant loans which gave rise to the judgments and never formally consented to them.
This judgement is a very significant judgement for those who find themselves being pursued by aggressive banks looking for PG’s to be honoured. It means that the bank is unable to force the sale of a family home if their spouse has not been party to the loan or has not given a PG.
This can also have some significant effects on anybody seeking to go bankrupt in order to get rid of all debts.
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