If you are owed money by a business and it looks like they’re about to go bust, it can be a really difficult situation. When there are many creditors waiting to be repaid, the process can get a bit messy. Let’s take a closer look at what insolvency is and how creditor repayment works:
Insolvency Processes:
When a company’s financial liabilities exceed their assets or they are no longer able to pay their debts off, this is business is technically ‘insolvent’.
A formal insolvency process may begin to stop a company from trading and usually, this is in the form of liquidation proceedings. This marks the end of the trading life of a limited company. During these proceedings, a liquidator is appointed to look over the company’s debts and distribute the remaining proceeds among the company’s creditors.
Unfortunately, just because a company that owes you money has entered liquidation, it does not necessarily mean you’ll get all or any of the money that you are owed.
Creditor Rankings:
The Insolvency Act of 1986 created a ranking for the order in which creditors will be paid. The lower down you are on the pecking order, the higher chance of all the money being paid out before your rank is reached.
If you’re concerned about a business that owes you money going into liquidation, take a look at the ranking order below to see where you fall on the ladder:
Nip it in the Bud:
If you are concerned that a debtor might be or might become insolvent soon, get in touch with Alba Claims so that we can look over your case.
Our panel of solicitors has a broad range of commercial claim and debt recovery experience, who are prepared to pursue claims on a no win no fee basis. Typical examples of claims we can help with are:
- Sums due to insolvent companies by debtors;
- Gratuitous alienations (when a director has attempted to put assets beyond the reach of creditors in anticipation of a future insolvency event); and
- Unfair preference claims (a transaction entered into by a debtor which has the effect of creating a preference in favour of a creditor to the prejudice of the other creditors).
