What happens to a loan if there is a co-borrower or a guarantor?
In the case of joint and several liability of debtors, the creditor has the right to demand performance from all debtors or from any one of them individually, either in full or in part. A creditor who has not received full satisfaction from one of the joint and several debtors has the right to demand the outstanding amount from the other joint and several debtors. Joint and several debtors remain liable until the obligation has been fully discharged.
Accordingly, where a loan agreement is entered into with multiple borrowers, the obligations of the remaining borrowers continue to exist if one of them dies. The bank is entitled to demand performance of the obligations from the co-borrowers in accordance with the terms of the loan agreement.
Pursuant to Article 330 of the Civil Code of the Republic of Kazakhstan, under a suretyship, the surety undertakes to the creditor of another person (the debtor) to be liable for the performance of that person’s obligation, in whole or in part, on a subsidiary basis.
The surety is liable to the creditor within the amount specified in the suretyship, unless otherwise provided by the terms of the suretyship. Before bringing a claim against a surety bearing subsidiary liability, the creditor must take reasonable measures to satisfy the claim against the debtor, including, in particular, by setting off a counterclaim and enforcing the debtor’s property in accordance with the established procedure.
Accordingly, where a suretyship agreement has been entered into to secure the performance of the borrower’s obligations, the bank may bring a claim against the surety to the extent provided for by the suretyship agreement. The existence of heirs does not preclude the bank from bringing such a claim against the surety.
In turn, where there are heirs, the surety has the right to seek performance of the deceased’s obligations from them to the extent that the surety has performed the debtor’s obligation to the creditor, pursuant to Article 334 of the Civil Code of the Republic of Kazakhstan.