Out of business, out of luck?

If a business has your money or your goods, and then goes bust, what can you do?

With a few shops closing down or going out of business you might be worried about goods you have taken in to be repaired, bought on credit or are paying off on layby. And if you have a deposit on goods or services or an unused gift voucher, you may be worried you will be out of pocket too.

When you get goods repaired, they still belong to you. You will need to be able to identify your goods and pay for the repairs.

For goods you have at home that you are still paying off on credit, the finance was probably arranged through a finance company that is separate from the business you bought the goods from. You will still have to make the payments to the finance company, but you won’t be at any risk of losing your goods.

When you buy goods on layby you have special protection under the Layby Sales Act. As long as you made a payment in the three months before bankruptcy, liquidation or receivership proceedings began, you can pay the rest of the purchase price and take the goods away. If there aren’t enough of those goods to go around then you will have priority over buyers who bought later than you. If there aren’t any goods available at all, then you will be a creditor with greater rights to get your money back than unsecured creditors and some secured creditors.

However, if you have a deposit on goods or services that you haven’t received yet, you become an unsecured creditor when the business closes. If you have unused gift vouchers and the business is liquidated then you also become an unsecured creditor. This means that it is unlikely that you will get your goods or money back or be able to use your gift vouchers.

What are your chances of getting your money back?

There are strict laws about which creditors should get paid first. Secured creditors have an agreement that if their money is not paid back then the creditor or liquidator can sell business assets to get the money. Secured creditors generally get paid out before unsecured creditors. Often there is not enough money left over for unsecured creditors.

How to get your money back

You may be able to get your money back if the business is sold to a new owner. But even if the trading name stays the same, it doesn’t mean that the company or person that owns it is the same. Often a new owner will buy the business’s name, property and assets but not its debts or liabilities.

If the closed business is a company then check the companies register [link] to see if the company is in receivership or liquidation. This can take 7-10 days to be updated with new information. Get in contact with the receiver or liquidator to register your claim. You will need to put your claim in writing and provide evidence of what you are owed, for example, a receipt.

If the business was not a registered company then the trader is likely to be personally responsible for returning your money. You can claim money back at the Disputes Tribunal or Court. However, if the trader has declared bankruptcy you will need to make a claim with the Insolvency and Trustee Service. You can check if the trader has declared bankruptcy and file a claim on the Insolvency and Trustee Service website. [link]

For more information about your consumer rights, visit Consumer Affairs website [link] or your local Citizen’s Advice Bureau.