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Personal guarantors' assets now under insolvency cloud
Mint Chennai
|August 21, 2025
Banks can immediately attach their houses, freeze bank accounts and sell pledged shares
Individuals who step in as personal guarantors for loans to companies are set to lose a crucial protection. Until now, when a company went bankrupt, guarantors enjoyed a "moratorium" that stopped banks and creditors from touching their assets until the case was finally decided.
That breathing space is gone with the proposed changes in the Insolvency and Bankruptcy Code (IBC), 2016.
The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, tabled in Parliament last week, makes it clear that existing moratorium protections under Sections 96 and 124 will no longer apply to personal guarantors.
According to lawyers that Mint spoke to, banks can now immediately attach houses, freeze bank accounts, sell pledged shares, or even push guarantors into bankruptcy—all while the company's insolvency case is still ongoing.
This story is from the August 21, 2025 edition of Mint Chennai.
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