Top Insolvency Questions from Creditors

Having worked in insolvency for many years, I’ve noticed that creditors ask the same when a customer faces and insolvency.  To help address these concerns, here are the most commonly asked questions by creditors regarding the insolvency process and their rights.

When am I going to be paid?

This depends on several factors including the availability of assets and the priority of your claim.

• Secured creditors have security over specific assets (like a mortgage over a property) and will be paid first and in full, from the proceeds of the sale of the assets.
• Preferential creditors include employees owed wages (subject to certain limits) and some unpaid taxes including certain VAT and PAYE / NIC contributions get paid next.
• Unsecured creditors are paid from any remaining assets.
• Shareholders get paid only when everyone else has been paid in full.
• Dividends to preferential and ordinary creditors come after the costs of the liquidation.

Remember, you can claim bad debt relief on the VAT element if you are not going to be paid.

What is the process for claiming any outstanding debt owed?

The process is simple. The Insolvency Practitioner will issue you with a claim form. Complete it and return it with evidence of your debt, like copies of unpaid invoices.

If there are sufficient assets to pay a dividend the IP will formally adjudicate on claims received and you will receive a copy which will state if your claim has been accepted. There is an appeal process if for some reason your claim is rejected.

Why is the director still trading?

Providing they have not been disqualified from acting as a director, there is nothing to stop an individual from starting a new business or continuing to trade a different business they were involved in.

So why does the director have a big house and fancy car when I’ve not been paid? A limited company means limited liability and providing the director has acted in good faith and exercised reasonable care in his actions, and has not given personal guarantees, they cannot be held personally liable for company debts therefore their personal assets are precluded.

I’m a small business, and the debt has a huge impact, can’t you just pay me?

In short, no.

An Insolvency Practitioner has to distribute assets in accordance with creditors’ rankings laid out in insolvency legislation. All creditors must be treated in accordance with the legislation and no creditor can be given an unfair preference.

Can I get my goods back?

If you have a valid Retention of Title (RoT) clause in your contract with the company you can potentially recover any goods still held by the company when it goes into liquidation.  You must be able to demonstrate you have a valid claim to RoT, be able to identify goods supplied and demonstrate you have not been paid.

You should contact the liquidator and advise of your potential claim immediately.

Provide details of the goods supplied and any documentation to support your claim including invoices, delivery notes, and evidence of your retention of title clause. 

Where possible, ensure your evidence includes information that will identify your specific goods, like bar codes. This is important when the company purchased identical goods from several suppliers.

Get in touch

Margaret Linn

Manager

I have 25 years’ experience working in Insolvency, both personal and corporate.  I advise individuals and company directors who find themselves in financial difficulty and am committed to finding a tailored solution that serves the…

Read more