What Happens to My Debt If My Creditor Goes Bankrupt?

Over the past couple of years, many businesses have struggled to stay afloat.

Due to the uncertainty caused by the Coronavirus pandemic, many companies have been forced into administration.

If you have a store card or existing debt with one of these bankrupt companies, you may be wondering what to do.

For example, you might think your unsecured debt will be automatically written off.

This is definitely not the case.

Keep reading our article to find out what happens with your debt to a company in administration.

What happens when a creditor goes into administration?

A company may have to enter administration or file for a bankruptcy order if they have serious problems with their cash flow.

Once the business has been made insolvent, it will be reviewed and managed by professional insolvency practitioners.

A company that is in administration will not be able to offer any new credit to customers, however, if you have any debts to this company, they will still need to be paid.

What should I do If I have a debt with a company that’s gone into administration?

You may presume that if a company has been deemed bankrupt that most debts you owe to them will magically disappear.

Unfortunately, this is never the case. You should keep making your monthly repayments as usual, unless instructed otherwise by the company in question.

The process of administration doesn’t impact the credit repayment terms, so you will still be faced with the same consequences should you fail to meet your repayment schedule.

If you owe debt from a store card, this debt will also still need to be repaid.

Store cards can be owned by a third-party company. In this case, you may need to redirect your payments to the third-party, instead of the company in administration.

If this circumstance arises, you should receive letters providing you with all the information you need to make the switch.

If you have any further questions regarding your debt or repayments, it is advised to contact the company in question directly.

If you are on a DMP

If you are on a Debt Management Plan and have debts to a company that has gone bankrupt, you should continue making payments as normal.

The debt management company with which you hold the DMP with will monitor the situation for you.

They will help ensure your payments get to the correct creditors.

If you are on a DRO

If you are on a Debt Relief Order and you owe funds to a company that has gone bankrupt, this will not impact your DRO.

Your credit card loan or store card account is still classed as a qualified debt.

Therefore, the success of your DRO won’t be impacted and you should continue as normal.

If you are on an IVA

If you are on an Individual Voluntary Arrangement and you have loans to a company that has gone bankrupt, keep making your payments to the insolvency practitioner as you normally do.

The insolvency practitioner you hold the IVA with will monitor the situation closely.

They will ensure that your payments are made to the correct creditor and make you aware of any changes or implications.

If you are bankrupt

If you are bankrupt yourself and you owe money to a company that has gone bankrupt, your company debts should still be included in your bankruptcy procedures.

A bankruptcy order covers secured debts and unsecured debts, so unsecured creditors will also be taken into account by the official receiver or insolvency service.

Your official receiver, who oversees your bankruptcy, should be aware that the company has fallen into administration.

The administration process of the company shouldn’t have any impact on your bankruptcy solutions.

Has my creditor gone into administration?

Below is a list of companies and creditors that have recently fallen into bankruptcy.

• 24/7 Moneybox
• BrightHouse
• Debenhams
• Laura Ashley
• Monsoon
• MyJar
• Piggy Bank
• Sunny
• Quick Quid
• Uncle Buck
• Welcome Finance

If you owe any of these creditors money, it is important to contact them as soon as possible to discuss your situation and ensure you are aware of any implications.

Is the business closed?

It is important to always double-check if the company in question has actually fallen into administration.

It may be the case that the company has changed its trading name, been bought by another company, started selling through its sister company, closed stores or moved online.

When a retailer or creditor has been formally declared bankrupt, it still takes time for the company to be closed down.

Once the bankruptcy order is made, you should expect to receive a formal letter, detailing the bankruptcy proceedings, your account and what options are available to you.

You can also check on the insolvency register to see if they are present. It is a legal requirement for either the official receiver or the insolvency practitioner to update any records with bankruptcy filings.

What about my company rewards?

Through the bankruptcy order, you should be contacted by the bankrupt company to discuss your store bank account and what will happen to any debts or accumulated rewards.

Typically, you should be given a redemption period, in which you can still collect your rewards. Past the notice period, your rewards will be cleared.

However, this will depend on the company and isn’t always the case.

If a company shuts down their stores to move its business online, you may be able to transfer rewards from your store card onto an online account.

Can I get a refund?

Depending on the circumstances of the bankruptcy process, customers may be able to file a complaint or claim compensation.

All complaints made against the company have to be valid.

If the complaint is found to be justified the amount of compensation you can receive will be dependent on the bankruptcy process.

What should I do if my debt management plan (DMP) company has closed down?

The Financial Conduct Authority, or FCA, has had to close down a number of debt management companies, as they have failed to meet the required standards.

Other debt management businesses have had to enter administration due to issues with financing and cash flow.

If you find yourself in this situation, contact a free debt advisory service as soon as possible.

Professional debt advisors can assess your circumstances and help you set up a suitable plan.

It may be that you can transfer your DMP over to another company.

Debt charities, such as Stepchange debt charity, will talk you through your options and assist you in making the right financial move.

Where can I get debt advice?

There is a wide range of qualified debt charities that offer free debt solutions and confidential advice.

All personal or financial information will never be discussed with anyone but yourself.

If you have unsecured debt and are unsure as to what options you may have, always speak to a professional debt adviser.

They will assess your credit rating and guide you toward a suitable credit agreement or personal loan repayment plan.

For example, Stepchange debt charity offers a money debt advice service, So, contact them as soon as you encounter any debt problems or money worries.

With a little hard work, you can become debt-free. This may seem unachievable right now, but that’s not true.

If you have a debt problem, start by seeking out free advice to learn the best way to deal with your debt. Get help now!

Summary

You may think you’re off the hook if you see the company you have debts with has fallen into administration.

However, this is definitely not the case!

Don’t be fooled into thinking you don’t have to make any more repayments, as this is almost never the case.

Contact the company directly to discuss the situation and to make sure you don’t fall behind with your debts.

The last thing you need is a debt collector showing up at your door.

If you feel like you will struggle to make repayments or that your debt is becoming overwhelming, contact a debt help charity straight away.

Debt help charities can provide confidential and free advice, helping you find the right debt solution for your unique circumstances.