Owed money from a bankrupt or a company in liquidation
Making a claim and the order of repayment
If you have been contacted by the official receiver (OR) or insolvency practitioner (IP) who is acting as the trustee/liquidator, then they already have a note of your claim. If you contacted the OR/IP, your details will have been added to the list of creditors.
You will be sent a proof of debt form to complete and return if the OR/IP intends to make a payment to creditors or hold a meeting of creditors - see the page in this guide on creditors' meetings and creditors'/liquidation committees. The information you provide helps the OR/IP confirm that you are a genuine creditor and the amount you are owed.
Order of priority for repayment of creditors
Secured creditors are the first to get paid when a debtor's assets are realised - sold or disposed of to raise money. For example, a creditor who holds a fixed charge - a security interest taken to protect against non-payment of debt - or security on an asset such as a mortgage has the right to sell the asset to recover their debt. Any surplus money is then handed over to the trustee/liquidator.
After the secured debts have been repaid, the trustee/liquidator distributes the remaining proceeds to pay the following - in strict order of priority:
- Liquidation/bankruptcy fees and charges - this does not include court fees.
- Debts due to preferential creditors - those entitled to certain payments in priority over other unsecured creditors - including wages owed in the four months before the date of the insolvency order, up to a maximum of £800, as well as all holiday pay and contributions to occupational pension schemes.
- In company cases, any creditor holding a floating charge over an asset, such as a debenture. This is where a class of goods or assets - eg the debtor's stock - are named as security for a debt.
- All unsecured creditors.
- Any interest payable on debts.
- The shareholders in company cases.
If full repayment of unsecured claims isn't possible, the money available is divided between creditors in proportion to the value of each claim. If such a dividend is to be paid, the OR/IP will notify all creditors they have addresses for. If you haven't already done so, this may be your last chance to submit a proof of debt form before you lose your right to a share of the money available at that time.
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 not get anything.
If you wish to see a full list of creditors showing how much each is owed, you can ask the OR/IP for this. The OR/IP is allowed to charge a fee for this service. Alternatively, you have a right to view the court file - unless the court directs otherwise.
If a statement of affairs has been submitted, the OR/IP will direct you to the court file. A statement of affairs is a document completed by a bankrupt, company officer, or director(s) stating the assets and giving details of all debts and creditors.
When paying a dividend, the OR/IP can reject the whole or part of a creditor's claim but must give reasons for doing so in writing. If you are dissatisfied with the decision on your claim, you can apply to the court in which the bankruptcy or winding-up order was made for it to be reversed or varied. However, before applying to court, you may wish to take legal advice.
Subjects covered in this guide
Insolvency Service Enquiry Line
0845 602 9848