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Question
Posted by: Shelby | 2009/12/14

Legal implications of signing surety

I' m taking a chance here, does anyone know the legal implications of signing surety for someone else on a home loan?

My husband and I bought a property together before we were married and put it into a company. My husband' s father extorted the company from us, we signed over the shares in duress, but have signed surety on the home loan. If he does not pay the bond, then my husband and I will be held accountable for the outstanding amout. The bank refuses to release us as surety, saying the father is too old to take over the bond. He is 74.

Is there anyone out there who has knowledge on this? Do we have rights to a forced sale on the property?

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Our expert says:
Expert ImageCyberShrink

THis is of course not at all myarea of expertise. It sounds as though the whole bulying, extortion, duress issue is complex, and while it may be very real, is hard to prove in court. As Liza says, consult your nearest university's law school's Law Clinic for expert advice.
:iza's comments sound right on the point.
And from your later comment, your father's mental state and his ability to make legally sound decisions may come into question.

The information provided does not constitute a diagnosis of your condition. You should consult a medical practitioner or other appropriate health care professional for a physical exmanication, diagnosis and formal advice. Health24 and the expert accept no responsibility or liability for any damage or personal harm you may suffer resulting from making use of this content.

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Our users say:
Posted by: Shelby | 2009/12/15

Hi Liza,

Thanks for that, it does make sense. We do have a lawyers contract signed that the whole transaction is pending them taking over surety. This was 2 years ago and they have not yet managed to offer any surety, they have been declined by all major banks. In the meantime they have run the bank account into overdraft, we handed it over when there was a nice income coming each month from the rent of the property. I don' t have the energy to fight again with this mad man that I have to call my father in law.

You don' t have to reply, I' m just letting off steam.

Merry Christmas.

Reply to Shelby
Posted by: cybershrink | 2009/12/15

THis is of course not at all myarea of expertise. It sounds as though the whole bulying, extortion, duress issue is complex, and while it may be very real, is hard to prove in court. As Liza says, consult your nearest university's law school's Law Clinic for expert advice.
:iza's comments sound right on the point.
And from your later comment, your father's mental state and his ability to make legally sound decisions may come into question.

Reply to cybershrink
Posted by: Liza | 2009/12/14

If you cannot afford a lawyer, go to your nearest university law clinic for help. I' ve never been in this situation, but from what I remember from my first year accountancy, is that you cannot legally hand a company over to new owners without the new owners having surety for all legal debts of the company as well (if the assets of the company are less than the debt). If the assets of the company were more than the debt at time of handover, the debt has to be repaid before any profit can be shown.

Don' t know whether you understood any of that - but either way, you' re in a win-win situation.

If they did not have surety for all the debts at the time of handover, the handover can be declared null and void, you get the house(and company) back.

If they did have surety for all the debts(i.e. assets are more than debt), they first have to repay the home loan - even if it means selling other assets to repay it. This would usually happen through an auction - which would be part of the legal process for this situation i.e. they cannot stop it from happening UNLESS they pay the bond on time and make sure they never get behind on payments.

As I' ve said - I don' t think that you can lose. Even if you can' t afford a lawyer, most lawyers offer the first consultation free - where you will find out what your basic options are, and what his/her costs will be. If you go to 3 different lawyers, you' ll get a great idea of what you should do. And if you then cannot afford a lawyer - the university law clinics offer great help to those who cannot afford it.

Good Luck
Liza

Reply to Liza
Posted by: Shelby | 2009/12/14

Hi Liza,

Thanks for your reply. The company was first a Pty Ltd, but was then converted to a CC after we handed over the shares of the Pty Ltd. So now the father and mother are members of the CC, but the home loan account statements read Pty Ltd.

Reply to Shelby
Posted by: Liza | 2009/12/14

Is the company registered as a CC, pty(ltd) ? Depending on how the company is registered, the legal implications will change.

Let me know and I' ll give you the benefit of my legal expertise (which is only from personal experience - I' m not qualified in any legal capacity, but I have had my own businesses, owned different properties, been on the bad side of debt etc. ) So I do know a little.

Reply to Liza

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