Owed Money by an Insolvent Company? How Creditors Make a Claim

If a company that owes you money enters liquidation, administration or a CVA, you can no longer simply chase the debt. You submit a claim, called a proof of debt, to the insolvency practitioner in charge, and payment follows a strict legal order that often leaves unsecured creditors with little. This guide covers England and Wales.

First steps when a customer becomes insolvent

1. Find the procedure and the practitioner. Liquidators and administrators advertise their appointment in The Gazette with contact details (reading a Gazette notice; other checks). Our register shows each company's procedure, date and, where available, practitioner and registered charges, revealing any secured lenders ahead of you.
2. Make contact. Official guidance says to contact the practitioner, or the Official Receiver in a compulsory liquidation, rather than wait.
3. Review credit. Get written confirmation of who will pay before supplying anything new; supplies the office-holder orders are normally paid as an expense of the procedure, ahead of ordinary creditors.
4. Don't terminate over the insolvency. Since June 2020, section 233B of the Insolvency Act 1986 generally stops suppliers ending a supply contract because of the insolvency procedure or earlier arrears, or making those arrears a condition of supply. Exceptions include some financial services contracts, the office-holder's consent (in a CVA, the company's) and court permission on hardship grounds.

How to submit your claim

In liquidation or administration, you send a proof of debt to the office-holder, usually on their form or through an online creditor portal. Under rule 14.4 of the Insolvency Rules 2016 it must state:

• your name and address;
• the total owed, including VAT, when the procedure began, and whether that includes interest;
• how and when the debt arose;
• any security or retention of title you claim;
• the documents that support it (and it must be dated and signed).

Documents are needed only if requested, but copy invoices, statements, signed terms, delivery notes and emails acknowledging the debt speed things up. Claiming is free, apart from your own costs. Debts of £1,000 or less can be treated as proved from the company's records.

Deadlines. Before paying a dividend, the office-holder must give notice of intended dividend, usually in The Gazette, with a last date for proving at least 21 days ahead, then declare the dividend within two months of that date. Claim early anyway: you need a proof in to vote.

Who gets paid first

Proceeds are paid in this order (HMRC's guidance):

1. Fixed-charge holders, from the sale of the assets their security covers.
2. Costs of the procedure, including the practitioner's approved fees.
3. Preferential creditors, mainly employees: up to £800 each of wages for the four months before the insolvency, accrued holiday pay and certain pension contributions.
4. Secondary preferential creditors: for insolvencies starting on or after 1 December 2020, HMRC for VAT, PAYE income tax, employees' National Insurance, and student loan and Construction Industry Scheme deductions. Corporation tax, employer's National Insurance, penalties and interest stay unsecured.
5. The prescribed part, ring-fenced for unsecured creditors from floating-charge assets: 50% of the first £10,000 plus 20% of the rest, capped at £800,000 for floating charges created on or after 6 April 2020 (SI 2020/211), or £600,000 where the charge is older and no newer one ranks equally or ahead.
6. Floating-charge holders, usually banks secured on stock and other changing assets.
7. Unsecured creditors, such as suppliers, customers owed deposits and HMRC for other taxes, sharing equally.
8. Shareholders, only if every creditor is paid in full with interest.

What that means for your dividend

Unsecured creditors get "pence in the pound", and often nothing. Say £110,000 of floating-charge assets remains after costs and preferential claims: the prescribed part is £5,000 plus £20,000, or £25,000. Across £500,000 of unsecured claims that is 5p in the pound, while a bank owed more than the other £85,000 takes all of it. The statement of affairs and the practitioner's reports estimate likely returns.

Retention of title, set-off and guarantees

Retention of title. If your terms say you own goods until paid for, you may recover unpaid stock. The clause must have been agreed when the contract was made (wording first seen on an invoice usually fails), and the goods must be identifiable, ideally by serial numbers on unpaid invoices or your name on them. Goods that have lost their identity, and claims to resale proceeds, rarely succeed unless the clause was registered as a charge. Contact the office-holder promptly and agree any collection with them.

Set-off. If you also owe the company money, the balances are netted off automatically in a liquidation, and in an administration once a distribution is notified. You claim, or pay, only the difference, and contracts cannot exclude this.

Guarantees. Insolvency does not cancel a guarantee: directors remain liable for company debts they personally guaranteed. You can claim in the insolvency and call on the guarantor, but cannot recover more than you are owed.

Reclaiming the VAT: bad debt relief

VAT Notice 700/18 lets you reclaim VAT paid to HMRC on an unpaid invoice. Insolvency doesn't change the conditions:

• you have accounted for and paid the VAT;
• at least six months have passed since the later of the payment due date and the date of supply;
• you have written the debt off in your VAT accounts and moved it to a separate bad debt account;
• the debt has not been sold or factored, and was not priced above your customary selling price;
• you claim within four years and six months of that later date.

Claim in box 4 of your VAT return. Still prove for the full VAT-inclusive amount, and repay HMRC the VAT element of any dividend you later receive. Cash accounting users have nothing to reclaim.

In a CVA: voting on the deal

A CVA keeps the company trading while it repays an agreed share of its debts. It passes with 75% or more by value of the creditors voting, unless more than half (by value) of those unconnected to the company vote against. It then binds every unsecured creditor entitled to vote, even those who voted against or were never notified. Secured and preferential creditors, HMRC included, keep their security and priority unless they consent. Challenges for unfair prejudice or material irregularity go to court, normally within 28 days of the result being reported to it.

In administration: the moratorium

In administration, a moratorium stops you starting or continuing legal action, enforcing security, repossessing goods (retention of title goods included) or forfeiting a lease without the administrator's consent or court permission.

Proposals must reach creditors within eight weeks, with a decision due within ten weeks. No vote is needed if unsecured creditors will get nothing beyond the prescribed part, unless creditors owed 10% of the debts request one. Administrators can pay unsecured creditors only through the prescribed part or with court permission, so dividends often follow a move into creditors' voluntary liquidation, where your existing proof counts.

Creditors' decisions and committees

Most decisions use electronic votes, virtual meetings or deemed consent, which passes a proposal unless creditors holding 10% by value object (fees always need a vote). Creditors with 10% by value or number, or any ten creditors, can demand a physical meeting.

A committee of at least three creditors can oversee the case and approve the basis of fees. If fees look excessive, a secured creditor, or unsecured creditors with at least 10% of the unsecured debt, can apply to court within eight weeks of the report disclosing them.

How long it takes

There is no fixed timetable. An administration ends automatically after one year unless extended, by up to a year with creditors' consent or longer by the court. Liquidators report annually and administrators every six months; property sales, investigations or litigation can take years. CVA dividends follow the approved proposal.

Frequently asked questions

What if I miss the last date for proving?

You can still prove, but cannot disturb a dividend already paid. If another dividend is declared, you receive the missed one first.

Can I add interest?

Yes, up to the start of the procedure, if the debt carried interest (under your terms or late payment law) or you had demanded payment in writing with notice of interest. Later interest is paid only if every creditor is paid in full.

Can I pursue the directors personally?

Usually not: a company's debts are its own. Exceptions are personal guarantees and, indirectly, claims such as wrongful trading that only the liquidator or administrator can bring. Share concerns with the office-holder, who must report on directors' conduct to the Insolvency Service within three months.

I worked for the company. How do I claim?

Apply online to the Redundancy Payments Service with the case reference from the practitioner (for redundancy pay, within six months of dismissal). It pays up to eight weeks' wages, six weeks' holiday pay, and statutory notice and redundancy pay, with weekly pay capped at £751 for redundancies from 6 April 2026 (GOV.UK). Claim the rest from the practitioner.

What if my claim is rejected?

You will receive written reasons; reply with more evidence. If you still disagree, apply to court within 21 days of receiving them.

Track new cases in our lists of liquidations, administrations and voluntary arrangements.

General information for England and Wales, not legal advice: for a large or disputed claim, speak to a solicitor or a licensed insolvency practitioner.