JESSICA and Elyse were the best of friends.

Jessica recently triumphed over a life-threatening illness and decided to chase her long-held dream of opening a small business specialising in flowers and cakes.

Jessica’s dream began to take shape when she secured a $50,000 loan from the bank but despite this achievement, she still found herself $80,000 short and also in need of a guarantor for her lease.

She turned to her trusted friend, Elyse.

Elyse lent Jessica the additional money and signed on as the guarantor for the lease.

Business flourished.

However, fate dealt Jessica a cruel hand when she was diagnosed with chronic fatigue syndrome.

Unable to work, Jessica faced mounting financial obligations: the bank loan, the repayment of Elyse’s loan, and the lease commitments.

In a desperate bid to support their daughter, Jessica’s parents, despite their modest means, managed to scrape together enough money to cover the bank loan repayments. Yet, the landlord soon initiated legal proceedings against Jessica for unpaid rent and the costs associated with refitting the premises.

Simultaneously, Elyse, now pregnant and in financial need, demanded Jessica to repay her loan.

Overwhelmed by her financial woes and with no viable solutions in sight, Jessica filed for bankruptcy.

Bankruptcy brought a temporary respite for Jessica, but it spelled disaster for Elyse.

As the guarantor of Jessica’s lease, Elyse found herself the target of the landlord’s legal actions, accountable for the outstanding rent and the refitting costs, notwithstanding that Elyse would not be able to recover the balance of the loan.

Elyse’s act of supporting a friend’s dream turned into a financial nightmare, highlighting the importance of thoroughly understanding the legal implications of being a guarantor and lending money without any form of security.

Jessica’s story serves as a reminder of how unforeseen circumstances, such as illness, can derail even the best-laid plans.

In the end, both friends were caught in a web of legal and financial turmoil, showcasing the need for careful business and legal planning when navigating business ventures and personal loans.

Thank you to Anthony Fogarty for his assistance with this column.

Email Manny Wood, principal solicitor at TB Law at manny@tblaw.net.au or call him on (02) 66 487 487.

This fictional column is only accurate at today’s date and cannot be relied upon as legal advice.

By Manny WOOD, Solicitor