What is the scope of the guarantee?
Read the guarantee to identify the obligation it covers, any monetary limit, the principal debtor, and the conditions for enforcement. The title of the instrument or the demand alone is not enough.
Notices and changes in the obligation
Examine the notices given to the guarantor, changes to the debt, extensions granted to the debtor, and the creditor's conduct. Israeli guarantee law contains protections, some of which depend on the classification of the guarantor and creditor.
Reviewing the balance
The demand should account for payments received, realized security, interest, and expenses. A transaction history and calculation should be requested, and only a verifiable amount accepted.
Insolvency of the principal debtor
The principal debtor's insolvency does not necessarily eliminate the guarantor's liability. Determine whether a proof of debt was filed, what security exists, and how recovery from the debtor relates to the claim against the guarantor.
When the guarantor also cannot pay
All debts and assets should be mapped, and a settlement, defense, or insolvency process considered according to the complete picture. The decision should not be based solely on the guarantee debt.
Concluding point
A demand against a guarantor requires review of the instrument, debt, and creditor conduct. The amount demanded is not necessarily the amount legally due.
Principal legal sources
- Guarantee Law, 5727-1967.
- Insolvency and Economic Rehabilitation Law, 5778-2018.