Your Debtor has gone into Liquidation

If you find out a debtor has gone into liquidation what should you do? Unfortunately, in business some companies need to wind up and go into liquidation, this is a hard time for company owners but also very difficult for creditors who may be trying to recoup money owed.

If a debtor has gone into liquidation you should be contacted by the liquidator or Insolvency Practitioner. The Liquidator will be going through all of the debts the company owes and prioritising payment, there are some payments that will be a higher priority, such as VAT, TAX and Liquidation fees however the liquidators will try to be fair in the distribution of monies. An insolvent company usually has assets, in this case, the Liquidator will oversee the selling off of assets at the highest value possible – although this is often below rate card. Liquidation with assets means the company can raise a sum of money to pay back creditors. Assets will be valued by a surveyor and sold at ‘fair’ value. If you have heard that your debtor has gone, or is going, into liquidation then you must make sure the Liquidator has any outstanding invoices or agreements in their possession at the time of registering. If your debt is not considered at the time of liquidation then you will not be able to claim the money back afterwards. If a debtor has gone into liquidation without assets, or illegally did not disclose your debt to the Liquidators, then you can claim VAT back on the invoice if you are VAT registered. If you are a creditor you will deal directly with the Insolvency Practitioner to arrange payment of debts, you should not contact the company owner. It can be a frustrating time if you feel you will not get back the money you are owed but the liquidator has a responsibility to ensure fair repayment.