A guarantee is a security for a debt, which is given to the creditor in case the debtor does not pay his debt himself. If necessary, the collateral can be used to pay the debt. The guarantee is classified as a personal guarantee because the guarantor undertakes to be responsible for the debtor’s debt personally.
Thus, in a guarantee, the guarantor cannot decide which of his assets acts as security for the debtor’s debt but is liable for the debtor’s obligation with all his assets. There are different types of guarantees:
- With a secondary guarantee the guarantor is responsible for the principal debt only if no payment is received from the debtor. Secondary means that the guarantor is responsible for the debt only if the performance cannot be obtained from the debtor himself. The guarantee is basically secondary, unless otherwise agreed.
- With a self-debtor guarantee, a guarantee according to which the guarantor is responsible for the principal debt in the same way as a personally liable debtor. In this case, the creditor can also demand payment of the debt directly from the guarantor.
- With a supplementary guarantee, a guarantee according to which the guarantor is responsible for the principal debt only to the extent that performance is not obtained from the property provided as security for the principal debt.
- A general guarantee means a guarantee that applies to more than just the identified principal debt; private guarantor means a natural person who has given a guarantee.
A pledge acts as security for a debt or obligation that secures the creditor’s right to receive it. In a pledge, the payment of the debt is secured by a certain pledged object and not, for example, another person with all his property. The pledgor can be either the debtor himself or someone else. When a pledge is given on behalf of the debtor, another person is talking about a debt pledge. In a debt pledge, a person gives his or her property to a creditor as security for the performance of another person’s obligation.
In a nutshell, it means that the debtor gives property to the creditor as a pledge in case he is unable to repay his loan according to the agreed terms. For example, when granting a mortgage, the bank usually requires the apartment to be purchased as pledge.
Third party debt pledging is a commitment based on which the person giving the commitment (pledger) gives his property (pledge) to the creditor as security for the performance of another person’s obligation. Private pledger means a natural person who has given a foreign debt pledge.
2. Joint and Several Liability
Joint and several liability for a debt, means that several debtors are liable for the debt at the same time. The creditor may then require the payment of the entire debt from any of the debtors without first demanding from each debtor only his own share of the debt. It is, of course, in the interest of the creditor that the debtor has both the ability and the desire to fulfill the debt. Therefore, the creditor seeks to demand payment primarily from the debtor who is most solvent. The person from whom the creditor decides to demand payment is obliged to fulfill it in full.
The debtor who has paid the debt in full may therefore claim a part more than his own share from the other debtors. In this case, the debtor who has made the payment in full also has the right to decide from whom of any remaining co-debtors he or she demands the payment.