Free Bail – Lawyers keep consumers straight
It may happen that one of your family members asks you to act as guarantor for entering into a credit agreement (for example for the purchase of a car) without you receiving a consideration for this yourself. In that case, there is free bail.
Since the guarantee can sometimes have far-reaching consequences for the person who has given guarantees, the legislator has ruled that the guarantee must be adequately informed and protected. The legislator has realized that protection by the law of June 3, 2007 concerning the free bail (inserting a new Chapter V free borgtocht- 2043 bis -2 043 g BW).
What is free bail
The free bail is the agreement whereby the guarantor is a natural person (not a company) and insures a principal debt free of charge in favor of a creditor. Without any personal benefit of an economic nature, that the guarantor could enjoy thanks to the guarantee. The beneficiary of the bail can be a professional seller of products or services ( for example, a bank or credit institution ). A guarantee in favor of a private person who does not act in the context of a commercial or professional activity therefore does not fall within the scope of the law, even if he is selfless.
1. The first protection given to the free deposit has to do with formal requirements. For example, the free guarantee must be drawn up in a separate document, with a handwritten agreement from the guarantor that reads as follows (Article 2043d, § 3 BW):
“ By guaranteeing me… for the sum limited to… (in figures) to cover the payment of the principal and interest for a duration of…, I undertake to repay the creditor of… the sums due on my goods and income, if and to the extent that… they themselves have not complied “
2. A second protection concerns the duration and scope of the guarantee. The duration of the guaranteed main commitment must be specified in the guarantee agreement. If the main commitment was entered into for an indefinite period of time (ie without an end date being indicated or the duration is explicitly stated in years, months or days), the legislator states that the free guarantee may not exceed the duration of five years (art. 2043 quinquies, §2 BW). With regard to the scope of the free guarantee, the amount is first limited. The free guarantee is limited to the sum stated in the main agreement, plus interest at the statutory or agreed interest without the total sum of the interests being allowed to exceed 50% of the principal (art. 2043sexies, § 1 BW) ). Subsequently, the law also stipulates that the guarantee cannot be concluded for an amount that is apparently disproportionate to the repayment options of the guarantor whereby these options must be assessed in the light of the movable and immovable property and income of the latter ( Article 2043sexies, § 2 BW). The assessment of this must be done in concrete terms.
3. A third protection for the free deposit is that during the duration of the free guarantee, the beneficiary (usually the lender) must inform the guarantor at regular intervals. For example, even if the principal debtor regularly performs the principal agreement, the creditor must inform the guarantor free of charge at least once a year about the state of the debt and the state of repayment. The communications made by the creditor, also need to simultaneously and in the same shape can be transferred to the deposit to the principal debtor (Art. 2043 f BW).
Finally, the heirs of a guarantor concerning the free bail are also protected. They must not guarantee the entire amount, but each is limited to the inheritance that belongs to each of them (in other words, the heirs of the free deposit do not have the “indivisibility rule” mentioned above).