Getting your money back if a company goes bust

A Comprehensive Guide for UK Consumers

Every transaction between a consumer and a business would be smooth in a perfect world. You pay for a product or service and receive what you were promised. Unfortunately, this is not always the case for consumers. Sometimes, businesses face financial difficulties that can disrupt their operations. In the worst-case scenario, a company goes bankrupt, leaving consumers having paid for a product they didn’t receive and wondering how to get their money back.

The idea of a business suddenly going under, especially after you’ve made a purchase or placed a deposit, is frightening. However, while the situation is far from ideal, it’s not all gloom and doom.

Learn how to navigate the frightening scenario of a business going bust without providing you with your goods. Discover your rights as a consumer, the protections in place, and the steps you can take if you find yourself in this unfortunate situation. Whether you face this challenge or want to be proactive, this article equips you with the necessary tools and information.

Understand the Types of Business Insolvency

To better understand the process of getting your money back, it’s essential to understand the different types of business insolvency. Knowing this will help you understand the situation better and give you an idea of where you stand as a consumer.

Liquidation: Often considered a last resort for struggling companies. It involves completely stopping the company’s operations and selling its assets to pay creditors. While this may sound grim, for consumers, it can mean the company is required to refund customers before paying off other debts, depending on the situation.

Administration: A ray of hope for struggling businesses. When a company is in administration, an external entity or individual salvages its operations. They work to streamline processes, manage debts, and, if possible, rescue the business. For consumers, this means there is a chance that services or products will still be delivered, although not guaranteed.

Receivership: A focused approach to repaying debts. In receivership, a receiver is appointed, typically by a bank or creditor, to sell specific company assets and settle particular debts. Unlike administration, receivership aims to protect the rights of the appointing creditor.

Company Voluntary Arrangement (CVA): This agreement allows a company and its creditors to come to a mutual arrangement. The company acknowledges its financial difficulties but proposes a structured plan to repay its debts over an extended period. A CVA offers hope for consumers as it shows the company’s commitment to meeting its obligations, albeit over a longer timeframe than initially promised.

In different situations, the consumer’s position and options for reimbursement can vary. By understanding a company’s financial situation, you can make a more informed decision about your next steps.

Making a claim

To ensure clarity and provide a concise guide, follow these steps if you suspect a merchant or retailer has gone into administration or been liquidated:

Start by visiting the company’s website to gather more information. Check if they are in administration or liquidation, and confirm the appointed administrator.

If the company has new owners, their details should be available on the website. Otherwise, you can find this information on the Companies House register.

Write a letter to the appropriate entity to register your claim for a refund. Clearly explain the reasons behind your request, such as non-delivery of goods.

It’s important to note that a refund is not guaranteed. However, by registering your claim, you will be added to the list of individuals owed money and receive updates about the case. Additionally, you will have the opportunity to vote at any creditors’ meetings.

Follow this link to the Gov.uk website and register as a creditor Here

Getting a refund?

If you’re having trouble with a purchase, contact the company you bought it from. However, if they cannot help, there’s still a chance you can get your money back if you paid with a credit card.

If you used a credit card and spent £100 or more, you’re covered by Section 75 of the Consumer Credit Act. This means the credit card company and the retailer are responsible for purchases between £100 and £30,000. This protection applies even if the retailer is no longer in business.

If the retailer you bought from goes out of business, you can receive a refund directly from your credit card provider. This is true even if you have closed your credit card account since making the purchase.

To ensure protection, using a credit card for major purchases and promptly paying off the balance is advisable. Even if only a portion of the purchase was made on the card (e.g. a deposit), you are still eligible for coverage.

Section 75 may not apply if you pay through a third-party app like PayPal.

Our guide will explain how to claim under Section 75

The Chargeback option

Section 75 does not cover debit cards, but another option, the Chargeback scheme, could help you get your money back. With Chargeback, your card provider can request a refund from the retailer’s bank by reversing the transaction.

If the bank approves your request, the funds will be taken out of the merchant’s account and returned to yours? And here’s another benefit – you can even use Chargeback for purchases made on credit cards that are under £100. Plus, you have a generous window of 120 days to make your claim using Chargeback.

Find out how Chargeback works.

Check the warranty

If you encounter a faulty item, it’s essential to refer to the warranty or guarantee included with the product for repair or replacement. While approaching administrators for a replacement is an option, it is not guaranteed. It also applies to vouchers and gift cards; the retailer will consider unused gift cards and vouchers credit owed.

Unfortunately, retailers are not legally required to offer refunds for gift vouchers. However, you can still ask for a refund. Check the company’s website for information on the administrators and send them a letter with proof of your gift voucher.

And here’s a helpful tip: if the vouchers were a gift and the person who gave them to you paid with a credit or debit card, they can use Section 75 or Chargeback to claim a refund.

Act quickly to redeem or spend your gift cards before it’s too late. If a retailer is in administration, they may still be open for business temporarily to repay some of their debts.

If possible, visit a physical store to make the most of your gift card. Otherwise, be prepared for a potentially lengthy wait for a refund, if available.

What to do when your travel company goes bust?

Thankfully, the vast majority of package holidays are protected by either ATOL or ABTA.

ATOL, or the Air Travel Organiser’s Licence, is a government-run protection scheme by the Civil Aviation Authority (CAA). Its main goal is to ensure your safety and financial security when flying.

All UK travel companies selling flight-based holidays must have ATOL status. If the company you booked with goes out of business, you are entitled to a full refund for your future holiday. And if the unfortunate happens while you’re on holiday, don’t fret! You are also entitled to reimbursement for hotel costs and flights back home.

When it comes to your holidays, you deserve peace of mind. That’s why most package holidays are under the protective umbrella of ATOL or ABTA.

ATOL, or the Air Travel Organiser’s Licence, is a government-backed scheme administered by the Civil Aviation Authority (CAA). Aimed at safeguarding air travellers, it ensures that if the unexpected happens, you’re covered.

You need to know that ATOL status is a must-have for any UK travel company offering flight-based holidays. That means when you book with a reputable travel company, you’re automatically entitled to a refund if they go out of business before your trip. But wait, there’s more! If you’re already soaking up the sun when the worst-case scenario occurs, you can be reimbursed for hotel costs and a return flight home.

If your travel company goes bankrupt, legalisation will probably cover you. You have the right to a refund that covers your hotel expenses and the cost of transportation back home if you’re overseas. This means you can still enjoy your holiday without any worries.

You can get your money back if you haven’t started your journey yet.

However, if you’re already on your trip and facing pressure from your hotel to pay, help may be available. You may have to cover the costs temporarily, but you can claim a refund later. Just make sure you keep all your receipts. When you return home, you can submit a claim to either ATOL or ABTA.

With these measures in place, you should have protection if something goes wrong with your travel company; you won’t be left out of pocket.

Not covered by ATOL or ABTA

Did you use your credit card to pay for your holiday? If so, you’re in luck! You can use Section 75 to get your money back. It doesn’t matter if you only used the card for a small payment, like a deposit. Even if you only put £1 on the credit card and paid the rest another way, Section 75 still applies. The only condition is that your total booking costs should be between £100 and £30,000.

If your booking costs less than £100, you can receive a refund using the Chargeback scheme provided by your card provider.

It is essential to review your travel insurance policy. While not all policies cover situations where companies go bankrupt, some offer protection. Take the time to carefully go through your documents, especially if ATOL or ABTA does not protect you.

Start Your Claim

It is easy to start your claim with us. Complete the form on our website for a no-obligation discussion about your situation, and find out if you are eligible to claim.

It is useful to have key information to hand when you call, such as dates, but we can talk you through everything that is needed. If you have a valid claim and want to go ahead, we can start your claim immediately.

The claims process is very straightforward. Simply fill in our form and ClaimsRefund.com will contact you to discuss. Get in touch today!