Thursday, 1 March 2018

Be ready to prove what you're owed

Businesses who are owed money when a customer goes bust will need to prove the value of the debt if they want to stand any chance of being repaid.

Andrew Oranjuik, from Martin-Kaye Solicitors in Telford, said the insolvency rules had been changed last year and it was vital that businesses knew how to make a claim.

“The changes simplified the insolvency rules in England and Wales in order to make it easier to make a claim online, and other changes were made to streamline claims by creditors.

“But if you are owed money, the most important criteria is that you can prove that the debt is actually owed.

“Under the previous rules, the Official Receiver or the insolvency practitioner representing the failed business would decide if they needed ‘proof of debt’ – if it was required, they’d send you a form to fill in. Now proof of debt is required for every claim, unless a court decides otherwise.”

Mr Oranjuik said if a business was owed a “small debt” – judged to be £1,000 or less – then purely writing to the Official Receiver or insolvency practitioner would be all that was needed.

“You’ll have equal rights to other creditors to any payments that are made by the debtor, but you won’t have a say in creditors’ meetings, so you’ll have to accept the terms that the other creditors agree.”

Mr Oranjuik said the problem was that businesses and individuals who went into liquidation or bankruptcy could not be relied upon to have accurate and up-to-date records.

“This means your debt may not show up, or it may show the wrong amount – if your records show a different amount from the debtor’s accounts, you may need to provide proof of debt even if it’s less than the £1,000 threshold. It’s particularly important to prove the amount if the debtor’s records show they owe you £1,000 or less, but they actually owe you more.

“Keeping clear and concise accounting records is a cornerstone of good business practice, and if you can prove your figures are accurate, it increases your chances of getting at least some of the money back that you’re owed.”