Guarantor stressed over unpaid loan

DEAR MRS MACAULAY,

About two years ago, against my better judgement, I guaranteed a loan for someone I’d considered a friend then. That person has made three months’ payments out of the 12-month agreement. He has now defaulted on the loan and has refused to pay, though he is working. He had lost his job shortly after receiving the loan and at that time I made three monthly payments towards the loan. This man has a new job and still refuses to pay. Now, the lender is suing for the outstanding amounts, totalling $303,000. The summons that I got states three of us — the principal borrower and two guarantors — for the suit. However, the lender has not served the principal borrower even though he knows where he is working (right here in Kingston) but he has served me and the other guarantor, according to him. When I made the three payments — December 2021, February 2022 and April 2022 — no receipts were provided even though I requested same. The lender has, however, attached a letter to the summons indicating the three payments. What action can I take if the lender refuses to sue the principal borrower?

Let me go directly to your question of what action you can take against the lender of the loan who has not actively pursued the borrower for the outstanding balance to clear the loan obligation. You really have no cause of action against the lender. You agreed to guarantee your erstwhile friend’s loan and by doing so you and the other guarantor assumed the legal obligation to make good on the loan and attendant interest if the borrower defaulted.

Surely you were aware of this obligation? Why do so many women guarantee their male friends’ or partners’ loans and not many men do so for their women friends? Or is it a fact that women who borrow meet all their obligations, whereas men often default?

You have no cause of action against the lender, who has the legal right to sue the guarantors of the loan. What you must do is act against the borrower, your erstwhile friend, who was clearly not a friend. You must retain a lawyer and sue him, not only for the total of the loan and its interests, but also for the cost of your legal suit against him for all the monies which his default forced you to pay. If you file a claim against your erstwhile friend, you should succeed on all I suggest that you sue him for. You may also add a claim for any interest you lost as a consequence of the withdrawals for the payments you did make. This is the legal cause of action which you have and with a chance of success.

The lender has the legal right not to pursue him because they know that would be a waste of time and a lost course of action. Clearly all their attempts over the two years to collect from him failed each time; this is why lenders ask for guarantors, so that they have someone to collect from or sue when the borrower fails to pay and is a lost cause.

So I hope you understand why you can only file a claim against the borrower, who has a legal obligation to protect you from any claim for his loan. You and the other guarantor have a legal obligation to pay the lender when the borrower defaults.

I trust that you will act to protect yourself by making the claims I have suggested against the borrower, and if the lender’s case for some reason has not been decided by the time you are filing your claims, you should add another claim for an order against the borrower that he indemnifies you from having to pay your portion of the lender’s total figure. It may also be possible to obtain an order that your case and the lender’s be heard together. You should discuss all these with your lawyer.

I hope that I have clarified the matter for you and that you will not guarantee any other loans in the future. Please retain a legal representative and properly protect yourself.

Margarette May Macaulay is an attorney-at-law, Supreme Court mediator, notary public, and women’s and children’s rights advocate. Send questions via e-mail to allwoman@jamaicaobserver.com; or write to All Woman, 40-42 1/2 Beechwood Avenue, Kingston 5. All responses are published. Mrs Macaulay cannot provide personal responses.

DISCLAIMER:

The contents of this article are for informational purposes only and must not be relied upon as an alternative to legal advice from your own attorney.