Individual insolvency rules: Breach of personal guarantee is quite severe

The law can help keep a check on instances where loans are given not on the basis of the debtor's creditworthiness, but because of a personal guarantor

Come December 1, the Regulations for Insolvency Resolution and Bankruptcy Proceedings of Personal Guarantors will come into effect. The rules state that proceedings against a corporate debtor and a personal guarantor can be heard simultaneously by the same Bench of the bankruptcy court. To begin with, the mechanism deals with one of the three classifications — personal guarantors to corporate debtors. Rules for partnership firms, and proprietorship firms and other individuals would follow soon. Geetika Srivastava explains the implications for businesses and promoters:

What are the laws and principles that govern debt resolution for personal guarantors?

Section 128 of the Indian Contract