Guaranteeing Someone Else's Debts

Abstract:     
Despite increasing awareness of the hazards of doing so, people still continue to guarantee loans for other people (usually relatives or partners) and by doing so, may end up suffering from "sexually transmitted" or "relationship" debt. When a guarantee is enforced, there can be serious consequences such as the loss of the guarantor's home. In this discussion, we outline a project undertaken by the NSW Law Reform Commission who did a project that included a major empirical component on third party guarantees. We note that guarantees for small business loans tend to cause the greatest hardship since business loans (and third party security for them) are not as tightly regulated as are consumer borrowings.

Number of Pages in PDF File: 19

Keywords: law reform, small business loans, third party guarantees, emotional pressure, guarantees, review of unfair contracts, sexually transmitted debt, relationship debt

JEL Classification: K10, K30

Accepted Paper Series