If you’re owed money from an individual or a firm which is currently, or about to become insolvent, there are several options you could take to try and get your money back.
Read on to learn about how to claim money back from a company in liquidation or a bankrupt individual or someone who you suspect is insolvent.
Confirm the Insolvency
Firstly, you will need to check whether the company or individual that you are dealing with has formally entered into an insolvency procedure. You can do this by:
- Searching the Individual Insolvency Register
- Searching Companies House
- Contacting the Insolvency Enquiry Line
- Undertaking a Bankruptcy Search at the Land Registry
- Checking the public notices of The Gazette
If you are owed money from a partnership, you will need to check the Individual Insolvency Register as individual members of the partnership can be declared bankrupt. If you are owed money by an LLP (limited liability partnership), you should search Companies House to confirm the insolvency position.
If the company is in liquidation or the individual in bankruptcy then, unless your debt is secured, you will need to approach the insolvency practitioner dealing with the debtor and submit a Proof of Debt to them.
The insolvency practitioner will seek to sell the debtors assets to raise funds to distribute the same to the creditors. You will therefore be placed into a pot with all other unsecured creditors with any funds distributed based upon the amount which is owed.
You will therefore only be paid if the debtor has sufficient assets.
If you are a secured creditor please contact us to discuss how the bankruptcy may affect your particular security.
Apply to Bankrupt the Debtor
If the debtor is unable to pay their debts, and they are not yet declared bankrupt, you could seek to bring a bankruptcy petition against them. Bankruptcy petitions can only be brought if the debt is undisputed and over the sum of £5000.
As above, if you successfully present a bankruptcy petition to a Court and obtain a Bankruptcy Order against the debtor the debtor’s assets are taken and sold by the Official Receiver or Trustee in Bankruptcy and the profits distributed to pay all the bankrupts unsecured debts.
Bankruptcy proceedings are only fruitful if the debtor has sufficient assets, however as bankruptcy carries a number of serious consequences for the debtor the threat or prospect of the same is usually enough to convince a debtor to pay.
Wind the Company Up
‘Winding up’, also known as Compulsory Liquidation, is another route you can pursue to recover the debts owed by a company.
Winding up a company follows a similar procedure to bankruptcy. To present a winding up petition you must be able to prove that the company is insolvent and have an undisputed debt of £750 or more. If your application is successful, the company’s assets are sold by a Liquidator and the funds are distributed to you and any other unsecured creditors.
However, as with bankruptcy, you are not guaranteed to get all or any of the money you are owed, therefore commencing insolvency proceedings carry a cost risk.
You are able to commence a County Court claim against a debtor through the usual procedure however the success of such a claim is dependent upon the debtors’ ability to ultimately pay the debt after judgment.
If the debtor has no assets or no means of payment you are unlikely to receive any payment regardless of whether you are successful at Court.
You do not necessarily have to make a claim if you find yourself in a complicated dispute.
If you’re finding it difficult to reach an amicable solution with your debtor, you may want to enlist the expertise of a mediator. A mediator acts as an impartial third party to help the opposing sides to resolve the dispute.
If it is clear that a debtor has no means of payment or any assets which could be sold to recover funds from agreeing a payment plan may be the most practical solution to the dispute.
Here at Abacus Solicitors, our Dispute Resolution team are highly experienced in dealing with conflicts and can work closely with you to resolve the situation, regardless of its nature or severity.
To find out more, visit our Dispute Resolution page to learn more about our services.