If you’re owed money, you’re a creditor of the person or company that is in debt to you. You have various options to try to get your money back, depending on the situation.
If you’re owed money by a person or company that can’t pay its debts (is insolvent), how you claim your money back depends on their circumstances.
This guidance describes how you make the claim when an individual has gone bankrupt or a company has gone into compulsory liquidation.
If the insolvent person is not in bankruptcy proceedings, you can apply to bankrupt them to try to get your money back. To try to get money back from an insolvent company that is not in liquidation, you can apply to wind the company up.
If the person or company has no assets you will not get your money back.
2. How bankruptcy or liquidation is managed
The early stages of a bankruptcy or liquidation are normally handled by an official receiver (OR). ORs work for the Insolvency Service and are attached to the court.
An insolvency practitioner (IP) may be appointed later to deal with the assets. IPs are usually accountants or solicitors who are authorised to deal with insolvency cases through the Insolvency Act 1986.
In the case of a bankruptcy, the OR or IP (known as the trustee) realises (sells) any assets (except any reasonable domestic items and items needed for the bankrupt’s job). In the case of a compulsory liquidation, an OR or IP (known as the liquidator) will take control of the company and realise (sell) the company’s assets.
The money raised by selling the assets or recovering monies owed to the individual or the company is divided between the creditors in a strict order of priority after the cost of the bankruptcy or liquidation (winding-up) have been paid.
3. How assets are distributed to creditors
Creditors who have made loans secured on assets (eg mortgages on property), can sell those assets to recover their money. Any money left over from the sale after the debt has been repaid is added to the sum to be shared between the other creditors.
The trustee or liquidator will distribute any proceeds from sold assets to unsecured creditors in this order of priority:
- fees and charges of the bankruptcy or liquidation
- debts to preferential creditors, such as wages owed and contributions to occupational pension schemes
- for a company, any creditor holding a floating charge over an asset
- all unsecured creditors
- any interest payable on debts
- for a company, the shareholders
4. Claim the money you are owed
The OR/IP should contact you if they know you are a creditor and ask you to complete a proof of debt template.
If you believe an individual or company may be subject to insolvency proceedings and no one has contacted you, you can confirm the insolvency by:
- searching Companies House (for a company insolvency)
- searching the Individual Insolvency Register (for a bankruptcy of an individual or an individual member of a partnership)
- contacting the Insolvency Enquiry Line on 0300 678 0015 or emailing email@example.com
- checking the public notices sections of The Gazette
If you are owed money by a partnership, the individual members (partners) also have a personal responsibility for the debt. This means they can go bankrupt individually, and the partnership itself can also be subject to compulsory liquidation. In this case you should search the Individual Insolvency Register to confirm the insolvency of each individual of the partnership. You can also search the register using the partnership’s trading name.
If the partnership you are owed money by is a limited liability partnership (the letters LLP will appear at the end of the name) the individual partners, like company directors, have no personal liability. You should search Companies House to confirm the LLP is insolvent.
These sources will tell you if the individual or company is insolvent and the relevant OR/IP dealing with the case. You can contact them using the proof of debt template.
When the OR or IP receives your proof of debt form they will add you to the list of creditors and include you on future correspondence about the case.
The OR will contact all creditors as soon as reasonably practical after the order is made.
5. Report of assets and liabilities
As a known creditor, you will receive a report giving estimates of the insolvent’s assets and liabilities and the circumstances of the insolvency.
If you have any further information about the assets of the individual or company, or about the conduct of the individual or company directors, write to the OR/IP. This may help them:
- to recover assets that the bankrupt or company is withholding
- in their duty to report misconduct
Always make sure the OR or IP has up-to-date contact details for you.
6. Appointing an IP
The OR may decide to ask the Secretary of State to appoint an IP as trustee (in the case of a bankruptcy) or liquidator (in the case of an insolvent company) in his/her place if the OR considers, in the circumstances of the case, an IP appointment is required.
As a creditor if the OR is trustee or liquidator of a case and you would prefer an IP to deal with the assets, you can ask the OR to arrange the appointment of your IP. You must be owed at least 50% of the value of the debts or have the support of other creditors to make that total before the OR will ask the Secretary of State to make the appointment.
The OR must follow a process to appoint an IP if creditors holding more than 25% of the value of the debts requests it. The nature of that process will depend on the circumstances of the case. The IP that is appointed will be the one that has the support of a majority of the creditors, by value of the debts.
The IP must inform all creditors that they have been appointed. If there are many creditors, this may be done through advertisement in the national or local press or on the IP’s company website.
When the case is complete, the IP will issue a notice summarising the payments to creditors and the costs of the case. If they are satisfied, the creditors then release the IP from their duties. If the creditors’ refuse to release the IP until any issue is resolved the IP can ask the Court or the Secretary of State to grant the release.
7. When an IP is not appointed
If no IP appointment is requested or made then the OR remains the trustee or liquidator.
ORs are released by the Secretary of State. They will provide creditors with a financial summary of the case when they apply to the Secretary of State for release. The financial summary will include details of:
- any assets realised
- costs of the case
- any payments made to creditors
8. Creditors’ or liquidation committee
If an IP is appointed, a creditors’ or liquidation committee can also be appointed. The committee supervises and assists the trustee or liquidator on behalf of the creditors.
9. Fees charged by the trustee or liquidator
Fees charged by the trustee or liquidator are paid using the money recovered from selling the bankrupt’s or company’s assets. The fees are paid before any money is divided between creditors. Read more on how assets are distributed to creditors.
The law states how much an OR can be paid for a case administration. The OR’s administration fees are:
- £1,990 for debtor’s application bankruptcy
- £2,775 for creditors petition bankruptcy
- £5,000 for liquidation
There is an additional general fee in all three types of case of £6,000. These fees are paid first after any realisation costs and apply in all cases where the official receiver has acted, even if an IP is appointed later as trustee or liquidator. Where the OR acts as trustee or liquidator they are paid 15% of the value of the assets they recover and sell.
An IP must ask the creditors (or the liquidation / creditors’ committee if there is one) to approve the basis of their payment for acting as trustee or liquidator. They must provide an estimate of the work they propose to undertake and the likely expenses of doing this work.
If the IP proposes to take their fees on the basis of time spent on the case, which means charging by the hour for the work undertaken, they will provide creditors with an estimate of the fees they are likely to incur. Creditors will need to approve this estimate before the IP can take their fees. This estimate will act as a cap on the fees and the IP will not be able to take fees in excess of the estimate without seeking further approval from creditors.
If the IP is unable to identify all the work involved, they may ask creditors to approve an estimate of their fees covering the identifiable work, up to a certain point in time. The IP will then seek approval from creditors for any further work needed and associated fees at a later point.
If an IP is unable to obtain approval from creditors, or is unhappy with the amount approved, they can ask the court to fix the basis and amount of their fees.
10. How much you will be paid
You will receive a notice that will tell you if there is a distribution of money, but you may not hear from the OR or IP for some time. It can take weeks, months or years – in some complex cases – to sell assets. Remember to notify the OR or IP if you change address.
If full repayment of claims is not possible, creditors instead get a dividend in proportion to the value of each claim. How much you are paid will depend on the amount of money that can be realised and the number of claims. If there are few assets, you may receive nothing. The report to creditors will tell you if any payment is likely.
If you are concerned (eg you think the report to creditors indicated there was a good prospect of a distribution), contact the person handling the case. Otherwise after the initial report you may hear nothing further until the trustee or liquidator sends notice that they are applying for release having completed the case.
You can ask for a full list of creditors and what they are owed. The OR/IP can charge a fee for this service or can refer you to the court (creditor’s petition bankruptcy) or Companies House (company) if a statement of affairs is filed there.
11. Registering your claim on a dividend
If a dividend is to be paid, the OR/IP will contact creditors. If you haven’t submitted a proof of debt form, this is your last chance to do so. Otherwise you may lose your right to share in any money after the dividend has been declared. The OR/IP can decide not to ask creditors whose debts are below £1,000 to submit a proof of debt. Those creditors would still receive a payment.
When paying a dividend, the OR/IP can reject the whole or part of a creditor’s claim. There are many reasons a claim might be rejected (eg the claim may be one which cannot be included in the bankruptcy / liquidation or there may be insufficient information to show the money is owed). The OR/IP must provide a reason for rejecting a claim in writing.
If you are not happy with the decision on your claim, you may apply to the court for the decision to be reversed or varied. You should seek legal advice if you wish to do this.
12. Legal action against the bankrupt or liquidated company
Unsecured creditors can’t take action against a bankrupt or company after the date of an insolvency order without the court’s consent. After obtaining consent, they must submit any claim to the trustee or liquidator.
13. Complain about the handling of your case
If the OR is handling your case:
- try to resolve your complaint with the officer dealing with the case or their immediate manager
- if not, write to the local official receiver – if that does not satisfy you, ask them for the details of the senior official receiver
- if matters cannot be resolved, take up the complaint with the Agency Chief Executive
If an IP is dealing with the insolvency, try to resolve your complaint with the IP directly. If you are not satisfied, contact the Complaints Gateway, which deals with complaints about the work of IPs authorised by a recognised professional body.
You can apply to the court if you are dissatisfied with the actions of the trustee or liquidator whether that is the OR or an IP. You should seek legal advice if you wish to do this.
The Secretary of State or the authorising body cannot intervene directly in individual insolvencies, nor can they reverse or modify an IP’s decision.
14. For more information
For general enquiries on insolvency matters contact the Insolvency Service.
The Insolvency Service and OR’s can only provide information about the administration of your case and cannot offer legal advice. You should always seek legal advice from a solicitor, accountant or IP. Contact your local Citizens Advice Bureau if you don’t have a professional adviser.
The UK insolvency trade body, R3, have produced a step by step guide to help creditors navigate their way through an insolvency process.