A reader asked:
I have 5k debts and I’m now on ESA. I’m also a guarantor for my mum’s Amigo loan – could that be included in a Debt Relief Order (DRO)?
There are three types of personal insolvency in England: bankruptcy, IVAs and DROs. Normally if a debt can be included in one form of insolvency, the same applies to the other two.
But for guarantor loans, it’s more complicated. So this article looks at the different combinations of being the borrower or the guarantor with DROs, IVAs and bankruptcy.
Contents
Have you already gone bankrupt or are in IVA or DRO?
Here it usually isn’t worth making a complaint by the borrower:
- If you have already gone bankrupt any refund goes to the Offical Receiver (unless the loans were AFTER your bankruptcy);
- In IVA any refund goes to the IVA firm to go to your creditors and it will not reduce your IVA payments or shorten your IVA
- If you are currently in a DRO, a refund is likely to cause your DRO to be ended.
But remember that your guarantor may be able to complain and get a refund! This won’t affect you at all.
Insolvency when you are the borrower
Your guarantor loan can be included in all forms of insolvency: bankruptcy, DRO and IVAs. But when this happens, the lender will go after your guarantor for the loan repayments…
If you don’t want this, a good option is to you can try to get your guarantor removed from the loan first and then go for one of the sorts of insolvency.
There are two possible routes to get your guarantor removed:
- your guarantor could complain to the lender they should never have been accepted as the guarantor. See How a guarantor can complain for details of this. If your guarantor is not well off and couldn’t afford the loan repayments this may work;
- or you can yourself put in an affordability complaint yourself, saying the loan should never have been given as it was unaffordable for you. See How to complain if you are the borrower for a guarantor loan for a template letter to help you do this. If you win this complaint, interest will be removed from your current loan.
That may not be enough to save your finances, so you may still need a DRO/IVA/bankruptcy. But if the lender agrees (or the Financial Ombudsman decides) that the loan is unaffordable for you, then your guarantor can then ask to be removed as the guarantor because the loan should never have been set up in the first place. This will work even if your guarantor is actually well off and can afford the loan repayments.
Insolvency when you are the guarantor
General points for all three sorts of insolvency
If this guarantor loan is the main cause of your financial problems and you could manage your other debts, don’t rush into any insolvency. Instead look at How to ask to be removed as the guarantor for a loan and see if that might work for you.
If you have already made some payments to the loan, and you win a complaint and are removed as guarantor, then you get all the payments refunded. And a CCJ for the guarantor loan and even a charging order on your house can be removed if you win a complaint.
1. Bankruptcy
Here a guarantor loan will be included in your bankruptcy in all cases.
It doesn’t matter if you are paying it all, having to make the odd payment or so far you haven’t had to pay anything. Bankruptcy will get rid of this debt for you.
If you have major financial problems then bankruptcy may be a good option for you. If a DRO isn’t possible and you don’t have a house with equity or other assets to protect, bankruptcy is usually a better option than an IVA would be. Read Bankruptcy – the big questions people ask and then talk to National Debtline about your options.
2. DRO
If you are already paying the guarantor loan it gets treated like any other debt going into your DRO
If you are not already paying the loan, then the guarantor loan cannot be included. As you aren’t paying it this isn’t an actual debt you currently owe but a contingent debt – one which you may owe in the future. Contingent debts can’t be included in a DRO.
What is a DRO looks at the main criteria you have to meet to be accepted for a DRO and who you should talk to about getting a DRO set up. DROs can only be set up by an approved debt adviser who will look at the terms of the guarantor loan and your current situation to make sure the guarantor loan can be included in it.
If you do meet the criteria for a DRO and the guarantor loan can be included, then this is very likely to be your best choice out of the three insolvency options. But your adviser will help you look at the other options to make sure.
3. IVA
A guarantor loan should be included in your IVA, unless there is already a charging order, in which case the debt is secured.
If you are already paying the guarantor loan:
- it gets treated like any other debt going into your IVA;
- some guarantor lenders normally vote against an IVA, so if the guarantor loan is large compared to your other debts it may be difficult to get the IVA approved.
If you are not already paying the loan, then the guarantor loan should still be included:
- if the IVA firm you are talking to says the IVA cannot be included because you are not paying it, talk to a different IVA firm! You do not want to set up an IVA and leave the guarantor loan out of it as that will leave you in a mess if the borrower gets into trouble and you have to pay the guarantor loan.
- when the borrower is still paying the guarantor loan, the “value” of the loan in the IVA vote should be just £1, as it is not known what your future liability will be. So that should make it simpler to get an IVA approved.
Get some good debt advice!
It is always important to get good, impartial debt advice before deciding which form of insolvency is best for you. And this is especially important with a guarantor loan – if you are the borrower, what you decide will affect your guarantor, and if you are the guarantor this article has looked at how your choice can be more complicated.
Don’t use google to decide who to talk to. You are likely to end up talking to a firm that will make money from selling your details to an IVA firm. Instead here is a list of good places to get debt advice.
For debt advisers – there is a good page on the technicalities of the different combinations in the Shelter- Advising Guarantors page on the IMA website. Any free sector debt adviser can register to gain access to this.
Is a DRO always better than an IVA?
Choosing between IVA and bankruptcy
Choosing between an IVA and a DMP
Jim says
Hi sara,
i was made bankrupt approx 8 years ago and took out an amigo loan 2 years ago.
if i make a claim and are successful would the compensation go to me or the insolvency service ?
Sara (Debt Camel) says
It goes to you – the money only goes to the Official Receiver if it is a refund on a loan taken before bankruptcy or before you were discharged.
Sally says
Hi Sarah,
I am guarantor for a amigo loan that my daughter has had, she has just completed a DRO. It was included on the DRO, would I be liable for this debt now?
Sara (Debt Camel) says
Hi Sally –
yes, haven’t Amigo already been asking you to pay this?
If you are being asked to pay then you can make an affordability complaint and ask to be removed as guarantor.
You have two possible reasons to complain.
– First if the loan was unaffordable for you when it was taken out – you could not have afforded to make all the repayments and still pay all your own debts, bills and expenses.
– Second if the loan was unaffordable for your daughter when it was taken out – if the Amigo loan got her into such a finacial mess she needed a DRO than it is likely it was unaffordable!
If you win your complaint, you will be removed as guarantor. This page looks at how to make one of the complaints with a template letter for a guarantor to use: https://debtcamel.co.uk/amigo-complaints-by-guarantor/
Have you made any payments to this loan? Were they before or after she started the DRO?
National Debtline on 0808 808 4000 can give you advice on this or your local Citizens Advice.
Sam says
Hi Sara got my self into a finance mess going back to work soon but at reduced hours and obviously reduced pay. I have a gaurentor loan with a family member and thinking about a debt relief order.. But what happens if the gaurentor has also lost her job. Due to the coronavirus. I will be working but I don’t think I would be able to pay that aswell as other bills. Was after some advice of some one please
Sara (Debt Camel) says
So the first thing to do is ask for a 3 month payment holiday from the guarantor lender (who is it?) – your guarantor cannot be asked to pay when you have a coronavirus payment break. Also any other debts you are struggling to pay. This will give you a breathing space to sort out what to do.
But if you were already in a financial mess before your wages reduced, then a breathing space to get back to normal isn’t a full solution.
I suggest you read https://debtcamel.co.uk/how-to-complain-guarantor-loan/ and think whether you have a reason to complain that the loan was always unaffordable. If you win this complaint, interest is removed from the loan and your guarantor is also released. At that point you can either make an affordable payment arrangement or go for a DRO if that is still your best option – talk to a debt adviser such as National Debtline on 0808 808 4000 about a DRO.
Also what is your guarantor’s financial position at the moment and what was it like when they became the guarantor? Could they really have afforded to make all the payments to the loan from the start and still paid their other debts, bills and expenses? Are they renting or do they have a house?
Sam says
Hi I’m already on a payment break the company is amigo loans. This ends on the 5th July. I was in a great position before the virus outbreak I was on double money double hours but with in a month or so of that happening the business I was working for decided it was no longer going to be trading so lost my job and I’m due to start my new one on the 15th June but it’s only 24 hours per week. My gaurentor rents off a private land lord. I just don’t no what to do for the best. I had all my bills covered and even had plenty left over now I could only cover my debts. My gaurentor is my mother but is now longer in work due to now being a full time carer for my grandad and she only gets something like 68 per week now.many thanks again
Vince says
If I had Amigo loans that were finished during a financial struggle time and they were paid off by a subsequent loan that lead to going bankrupt a few years later. Is it possible to put a claim in for the loan and a top up loan, considering they were not part of my bankruptcy.
Sara (Debt Camel) says
No. Well you could claim and win, but the money would go to the Official Receiver.
This os only worth doing if your guarantor made any payments?
Vince says
Even though I am recently discharged from my bankruptcy. The loans were never part of the bankruptcy.
Sara (Debt Camel) says
Yes, even though you are discharged. The legal right to make a complaint about the loans was technically an asset that you owned when you went bankrupt, even though you didn’t realise you could do it. This “asset” then became the property of the Official Receiver who still owns it.
A similar situation has happened many times with PPI claims.
rod says
Hello
i am a guarantor to an amigo loan for my son girlfriend she has paid this for three years but has now had to enter a IVA
amigo has agreed to the IVA and added some terms and conditions they have asked for 80% of the monthly repayments which are £129 p/m and the monthly repayments have to stay at £129 for three years
the problem i have is amigo are chasing me for the full loan amount so i have asked if i could pay my part of the loan off as a lump sum and then allow the IVA to take over the rest but amigo only want the full amount and are now talking of a ccj even though they have not taken the first payment yet
Sara (Debt Camel) says
that sounds like a mess.
Does she have any assets? Is there a reason she went for an IVA and not bankruptcy? How far into this IVA is she?
Do you think the repayments were affordable for her at the start of the loan – could she have made them all and still paid all her other debts, bills and expenses?
Do you think making all the loan repayments would have been affordable for you at the point where the loan was given three years ago? Could you have paid all the repayments and still paid all your own debts, bills and living expenses?
Sam vowles says
Hi
My guarantor for amigo loans has enter a iva, she has put the loan on her Iva and asked me to pay her £100 per month instead of paying Amigo.
I’m sure the creditor will still contact me for the money as I’m the one who signed the agreement?
Can you advise please?
Sara (Debt Camel) says
Some questions which may sound random but which matter:
– are you still paying Amigo? In full?
– has your guarantor being paying Amigo? How much has she paid?
– did you have previous Amigo loans before the current one, if you did did she make any payments to those?
Rose says
I got an amigo loan a couple of years ago and have been paying it every month since. I’ve come into financial difficulty and am struggling to pay. I rang to try and set up a new payment plan but refused due to my financial circumstances and are now chasing my guarantor although they’re situation is the same as mine is now. How can I get the amigo loan into a debt relief order for myself without it effecting the guarantor?
Margaret Wilson says
my brother took out an amigo loan with my sister as guarantor. he went bankruptafter a year and I took over paying for the loan. (4 years now. ) as sister could not afford it. she is still named as the guarantor, but money comes out if my bank account. . it did not become part of bankruptcy. He is discharged and has put in a claim for a refund of charges. His plan is to give the money to me for paying the loan for him. But will he get the money from the receiver. I think i should get the money as I have paid the bulk of the loan .
Sara (Debt Camel) says
Can I be clear, did Amigo think you were p[aying on behalf of your brother? Or did they ask your sister to pay and you have paid for her?
Mandy says
Hi, My sister is a guarantor for me with amigo loans, I fell behind on payments a couple of months ago and had an arrangement plan with them so that they didn’t chase my sister for the money. My sister who is my guarantor has just had a DRO approved and this amigo loan is on that, does that mean that the debt is still owed by me or is it written off completely now?
Sara (Debt Camel) says
The debt is still owed by you. But now this is just a normal unsecured loan.
What is the rest of your debt situation like? Can you really afford the lower payments? If not they can be reduced.
Have you looked at making an affordability complaint about thus loan, see https://debtcamel.co.uk/how-to-complain-guarantor-loan/ for how to do this. If you have yiyr complaint upheld then interest is removed so you only have to repay what you borrowed – a big help!
Mandy says
I’m currently waiting for citizens advice to do a DRO of me too as I’m currently out of work due to coronavirus. Is it still worth putting a complaint in? Thanks for such a fast reply too!
Sara (Debt Camel) says
No there is no point in making an affordabilty complaint if you are in the process of applying for a DRO.
The Amigo will need to be listed on your DRO – as I said it has not been written off so you do still owe the money at the moment. Make sure your DRO adviser at Citizens Advice knows about your guarantor’s DRO.
Also it is often a good idea before a DRO to stop ALL payments to creditors so you are treating them all equally – this would also apply to this Amigo loan. I suggest you talk to your adviser about this asap and cnacel the direct debit to Amigo if they think you should do this.
Mandy says
Great thank you for your advice!
Paul says
Hello… Can I get some advice. My have a guarantor loan with amigo my guarantor died last year and amigo are aware of that and updated my account. His estate has been settled they’ve made no claim as I was paying. Now I would like to do a DRO I can obviously include them on the DRO can they go after the money elsewhere now or is it only me they can chase?
Sara (Debt Camel) says
Interesting question. I think you should talk to a DRO adviser about this. They can take specialist advice if they haven’t come across this before.
If you don’t have a DRO adviser yet, I suggest you phone National Debtline on 0808 808 4000.
Sue says
Hi there Sara,
My mum took out an Amigo Loan 2 years ago, due to the pandemic she no longer has a job, she was paying them a lump sum every month and now she’s fallen behind because of not being in a job. I am her guarantor for the loan, but again, due to the pandemic, I am currently furloughed. She is now currently going through an IVA. And the company she has gone through have said that I can be part of the IVA too. But when she rang up, they said they can’t put me on the same account. I now have Amigo Loans constantly hounding me for money every day via email. Despites all the best efforts of trying to explain my situation to them. Just wondering if there is any advice you can give. Thank you!
Sara (Debt Camel) says
SO first your mum.
Does she own a house? A car? If her only income is benefits she is going to struggle badly in an IVA.
And then you.
How large is this Amigo balance?
What other debts do you have apart from this Amigo one?
Do you own a house? A car?
Do you think this loan was affordable at the start, before the pandemic? Could really have made all the repayments and still paid your own debts, bills and living expenses?
Sue says
She is currently on UC because of not having a job. Her partner pays £40 towards the IVA and then she pays the rest (They are asking for £212 every month) She doesn’t own either.
The balance is around £9,000, this is the only debt I have.
I don’t own either.
I don’t believe it was. And it definitely isn’t now with the current pandemic.
I definitely couldn’t of paid the monthly payments, as well as my living expense.
Sara (Debt Camel) says
So her IVA has started? If it hasn’t, you should suggest she talks urgently to National Debtline about a Debt Relief Order instead. Over 30% of IVAs fail because people cant keep up the payments. In a DRO she has to make one payment of £90, then no monthly payments. There is a £20,000 limit on DRO debts at the moment but this is probably going up to £30,000 in May.
If her IVA has started, she should also talk to National Debtline about a DRO as it may well be better for her IVA to fail so she can then have a DRO. If she is paying £212 a month, that is £12,000 over the course of the IVA!!!!
For you it seems worth seeing if you can get yourself removed as guarantor. Send in a complaint using the template here https://debtcamel.co.uk/amigo-complaints-by-guarantor/.
I assume you have cancelled your direct debit to Amigo. At this point all they can do is send you cross texts and emails. they are not going to go to court when you have an open complaint and with the Scheme coming up.
Ultimately if you do not succeed with your claim in the Scheme (if that goes ahead) or in administration (if Amigo go bust) then you too can look at what your debt options are. But as this is your only debt, this seems premature at the moment. You could talk this through with National Debtline too though if you want now.
Sue says
Ahh brilliant, thank you Sara. I’ve put in a complaint through amigo. I couldn’t find a email address for the debt side of the website. But I’ve put in a complaint application? Should hear off them in a few days.
Thankfully they never had my bank account details. So haven’t attempted to take money out.
I’ve passed on this information for my mum to read over. I’ll keep you updated when I hear off Amigo. Thank you again
Sue says
Hi Sara, so my mum rang the national debt line, they told her to take out an IVA rather than a DRO.
Im just waiting to hear back off Amigo loans now, they’ve got my complaint.
Sara (Debt Camel) says
I’m sorry but is your mum sure she spoke to National Debtline on 0808 808 4000? This is their website https://www.nationaldebtline.org/
There are firms that have similar names and that try to sound like National Debtline that are not debt advice charities but commercial firms whose only aim is to sell people IVAs.
If your mum is renting and on Universal Credit, why did this firm say a DRO was not right?
Sue says
She went through the website, rather than ring them up. I’ve told her it might be a worth ringing them up instead.
She has the creditors meeting tomorrow, could it be possible if I spoke to the debt line instead?
Sara (Debt Camel) says
really I would like her to talk to National Debtline BEFORE the IVA vote goes through. There may be a good reason for the IVA but nothing you have said suggests what it is. Tell her to phone 0808 808 4000 and be persistent – it can take time to get through.
Sue says
Hiya love, sorry to bother you again. Quick question – if I’ve put in a complaint about Amigo loans, can they still demand money off me?
Sara (Debt Camel) says
Yes they can demand, but in practice this is just bluff – if you don’t pay them they are not going to go to court when you have an open complaint and with the Scheme coming up.
Luke says
Hi there, I got an amigo loan for £5000 my cousin is my guarantor I haven’t paid since November 2020 as I have had breathing space as I lost my full time job due to covid I work 16 hours a week now they want me to start paying the £198 on May 18th but I physically can’t pay it and neither can my guarantor. If I can an iva or dro will my guarantor be contacted for payment.
Sara (Debt Camel) says
Hi Luke, sorry a few questions!
was this your first Amigo loan? It was for 5 years – how much have you paid to it so far?
Can you say what the rest of your financial situation is like now – do you have other problems debts? Are you buying or renting?
Was it always difficult to pay the loan from the start, but you just managed before you lost your job? Or was it OK before?
Your guarantor’s situation at the time you took the loan – could they have been able to make all the payments to it and still pay their own bills and debts and normal living expenses?
H says
Hello Sara,
Your website has been huge help for the past two years, thank you.
In short, I have not been able to recover my sole trading business since the first lockdown in May 2020 and have seized all payments (that totalled to around £1,300 monthly, £20,000+ total debt).
I have one amigo loan with a guarantor (£10,000+). Made an affordability complaint in October 2020, then moved on to forwarding everything to Ombudsman as Amigo delayed giving me an answer. My guarantor kept paying for the first few months of 2021 until we decided to stop due to them not returning to me and ombudsman also not being able to carry on processing the complaint. Communication with Amigo has pretty much seized from their end, and we have only heard from them once after we stopped paying.
I have decided to file for bankruptcy and will get help with the £700, however, one question remains that I could not find an answer to: What happens to my complaint and guarantor in regards to that? I suppose it is the only reason why me and my guarantor are not currently getting hassled by Amigo. I believe I have a good case and in the very least my guarantor would be released if it was to go through with part of the balance being paid off. On the other hand, delaying bankruptcy for this reason alone does no make much sense and I should have done so earlier. Would the complaint somehow become void?
Sara (Debt Camel) says
if you go bankrupt you no longer owe the debt and it becomes the responsibility of your guarantor.
Your complaint should continue, any cash refund to you would be paid to the Official Receiver – but as you have not paid more than you borrowed (I am assuming you did not have any previous Amigo loans?) then you would not get a cash refund anyway.
If your complaint is upheld, your guarantor should be removed from the loan.
It isn’t clear at the moment if you will need to make a claim to the Scheme (if it goes ahead) or to the administrators9if the new Scheme fails) or if your previous complaint will automatically enter a claim – you need to follow up on this when more details of the Scheme are known.
Your guarantor can also make a complaint that the loan was unaffordable for you – and you can supply them with bank statements and credit record to support that I hope. Does your guarantor also have a case to say that the loan was unaffordable for them at the time the loan was given?
Have you taken debt advice on going bankrupt? I am not trying to dissuade you, but everyone should take an hour to discuss this in detail with an adviser. If you haven’t, I suggest you phone National Debtline on 0808 808 4000.
Chris says
Hi
I took a new start up business guarantor loan out, secured against my guarantors house. .
I’ve now had to close the business down and find full time work again as it wasn’t bringing enough money in to cover all outgoings…
Therefore the business loan isn’t being paid and I’m
Wondering if I should take out an IVA, DRO or Bankruptcy to solve this from getting really bad…
However I don’t want them chasing my guarantor if I do this, so how do I fix this mess?
I think personally, I had no income and I should never have been given the finance based purely on a guarantor because I couldn’t afford it before I got it, and having a new business meant it could go both ways, and unfortunately it failed so, what do I do? Any advice would be helpful
Thanks
Sara (Debt Camel) says
Who was the lender?
Chris says
Hi, it was nationwide finance.
(Not the bank but a separate business called nationwide finance, they have a green logo.
Sara (Debt Camel) says
ok, that is not good news. This is probably not “conumer credit” so the affordability issues I tend to focus on are unlikely to be relevant.
Yes you can put this debt into an IVA, DRO or bankruptcy. But the lender is very likely to go after the guarantor. I suggest you talk urgently to Business Debtline about your options: https://www.businessdebtline.org/
Ian says
I am the guarantor to my sons amigo loan I have been told by amigo that the final payment is due by myself next summer now surely if the final payment by myself then my son who pays a smaller amount to amigo via an Iva correct me if I’m wrong wouldn’t his payment stop at the same time
Sara (Debt Camel) says
Are you making payments at the moment?
Has your son made an affordability complaint to the Amigo Scheme?
Amanda says
Hi Sara,
I won a few affordability complaints with Amigo, UK credit and another company a few years ago on guarantor loans and agreed to pay a reduced affordable amount. I am now entering bankruptcy (no other option) so need to include these. UK Credit and the other are both now contacting the guarantors as I stopped paying the agreed amount. Should they legally have released them?
Sara (Debt Camel) says
yes, it is a shame you did not get this sorted at the time. Amigo automatically released guarantors when a borrower won the case, but not all lenders did.
Your guarantor can complain about this.
What is your guarantor’s financial situation like now? what was it like then?
Have you actually gone bankrupt and have you taken debt advice on this? It may well be your best or indeed only option but it is ALWAYS woth your time to talk this through with a good debt adviser first. If you haven’t, phone National Debtline on 0808 808 4000.