Few things unsettle a creditor more than learning their debtor has gone into insolvency. The instinct is to assume the money is lost. Often it is not — or at least not entirely. Here are your options when a company that owes you money goes under, including one many creditors overlook: selling the claim.
Understand what kind of insolvency it is
- Liquidation (winding up): the company is being closed down and its assets sold to pay creditors.
- Administration: an administrator tries to rescue the business or achieve a better result for creditors than immediate liquidation.
- Company Voluntary Arrangement (CVA): a deal to pay creditors a proportion of what they are owed over time.
Each has different implications for how — and how much — you might recover.
Where you stand in the queue
Insolvency law sets an order of priority. Secured creditors and the insolvency practitioner's costs come first, then preferential creditors, then unsecured creditors — where most trade suppliers sit. Unsecured creditors typically receive only a few pence in the pound, if anything, and only after a long wait.
This is the hard truth: proving in an insolvency is often a slow process ending in a small dividend, or none at all.
Your practical options
- Submit a proof of debt to the liquidator or administrator and wait for any dividend.
- Check for retention of title — if you supplied goods under a valid ROT clause, you may be able to reclaim them.
- Look at personal guarantees — if a director guaranteed the debt, your claim may survive the company's insolvency.
- Sell the claim to a buyer who specialises in insolvency recoveries.
Why selling an insolvency claim can make sense
Waiting years for a possible small dividend ties up your time and leaves the outcome uncertain. A buyer who understands the insolvency process may pay you a fixed sum now for your claim, taking on the wait and the risk. For many creditors, a certain payment today beats an uncertain trickle in three years.
Do not forget the guarantors
If a director or parent company guaranteed the debt, the company's insolvency does not extinguish that guarantee. A guaranteed claim is far more valuable — both to you and to a potential buyer — because there is a solvent party still on the hook.
Conclusion
An insolvent debtor does not automatically mean a total loss. Prove your debt, check for retention of title and guarantees, and weigh the slow, uncertain dividend against selling the claim for a fixed sum now. Sometimes the smartest recovery is to let a specialist buyer take on the insolvency and pay you today.
