What to do if your debtor is in Insolvency Proceedings or dissolved?

It may come to light after your Pre-action profiling that your debtor is insolvent, currently in insolvency proceedings or dissolved. If this is the case the traditional debt recovery route with a Letter Before Action is not appropriate.

The purpose of this article is not to advise on the different insolvency routes but advise on the process if you find your debtor is already involved in one.

If a Company if dissolved or has been struck off, you cannot commence action to pursue your debt. You can make an application under s1029 Companies House 2006 to restore the Company, but this may not be commercially viable; it is likely that as the company has been dissolved or struck off, they have no assets to their name which can be used for payment.

With a company the Insolvency states are:

• Administration
• Company Voluntary Arrangements (CVA)
• Receivership
• Liquidation (Winding Up)

With an individual the insolvency states are:

• Bankruptcy
• Debt relief Orders
• Debt Management Plan
• Individual Voluntary Arrangements (IVA)

If the debtor is involved with any of the above, you or your solicitor will have to contact the Insolvency Practitioner or appointed person instructed to deal with the Insolvency and indicate that you would like to be involved with the process.

Details of who the Insolvency Practitioners are for Administration, Receivership, Liquidation and Bankruptcy can be found on the London Gazette under Insolvency Notices.

As you are a creditor of the debtor you should receive notice of the CVA, IVA, debt relief order and debt management plan. If you don’t receive this and any correspondence is sent to the debtor chasing the debt you should receive notification, then.

With Administration, Receivership, Liquidation and Bankruptcy once you have indicated your intention to be a part of the process you will be sent a Proof of Debt form for you or your solicitor to complete. This will evidence how much is owed to you plus the interest, if you have any security over the debt and will need to include proof of the debt i.e an invoice.

All the above routes will take time to complete and it is unlikely that you will receive the whole amount of your debt back, the amount you receive depends on the assets the debtor has. For more information on this process or how to initiate any of these process for yourself or against a debtor please contact the office.

Amy Carlton is a debt recovery manager at law firm Sintons. To speak to Amy about any debt-related matter, contact her on 0191 226 3649 or amy.carlton@sintons.co.uk.