Bitterwallet's How To... deal with companies in administration

26 October 2010

bitterwallet - dealing with companies in administrationRemember the great Farepak Christmas hamper crisis of 2007? And who could forget the agonising collapse of our great national institution, Woolworths, the following year? Sadly, no one is safe in these times of economic crisis. And, as customers of wedding gift service, Confetti will attest, administration can come as a rather nasty shock; suddenly you can find yourself having forked out for something you have little-to-no chance of ever receiving.

But don’t worry, you might be able to get some – or if you’re lucky, all – of your money back.

What is administration?

Essentially, having incurred financial doom, the management hands over the reins to an insolvency firm. If they think it’s worthwhile, they can keep the company running as a ‘going concern’ and continue trading, which means you’ll get a refund or whatever goods you’ve paid for. Unfortunately, that rarely happens. Realistically, the insolvency firm will scrape together as much as it can for:

• the creditors (if the company has borrowed using its property/assets as security)
• the insolvency folks themselves
• the employees (for redundancy payments)
• and finally – the customers

And it's usually in that particular order.

How do I get my money back?

It really depends on how you paid for your goods. If you used a credit card, you might be in with a shout; if you used cash, don’t get your hopes up.

I paid with a credit card – can I get my money back?

Section 75 of the Consumer Credit Act of 1974 might just be your saviour. It states that if the goods were valued at more than £100 (but not over £30,000), the credit card company is ‘equally liable,’ so you have the same rights with them as you would’ve had with the floundering retailer. This extends to faulty goods, so even if the company goes into administration after you’ve got your stuff, you can still get a refund from your credit card company. This is backed up by the Sale of Goods Act 1979, which states that the goods must be of satisfactory quality, as described, fit for purpose and last a reasonable length of time.

I paid with a debit card – am I covered?

Debit cards aren’t normally covered, however MasterCard and Visa’s debit cards both include a Charge Back Scheme. They’re not legally binding like the Consumer Credit Act, but they can potentially help you get your money back. Basically, if you paid for something and didn’t get your goods, the Charge Back Scheme allows your bank to reclaim the money from the retailer’s bank.

Note: it’s important that you notify your bank within 120 days of realising there’s a problem with your transaction.

I used cash – is there anything I can do?

Unfortunately, there’s little chance of getting your money back; certainly not all of it. The best course of action is to write to the administrators, but you’ll inevitably be joining a very long queue of people hoping to get at least a partial refund. And, as mentioned before, the creditors, administrators and employees are all at the front of the queue. It’s a good idea to check the company’s website first, as the administrator might have set out a specific method for making claims.

If you happened to make a partial-payment using your card, even as little as 1p, you’ll be covered under the Consumer Credit Act of 1974 as outlined above. Again, the total value of the goods must be over £100; any less than that, and you’re screwed.

My holiday company has gone into administration – am I covered?

Most travel insurance policies won’t cover administration, unless the clause is specifically requested and agreed beforehand. However, there’s a scheme called ATOL (Air Travel Organisers’ Licensing) which some tour operators sign up to; in case of ‘failure’ (as ATOL call it), your holiday would be covered. And, as an added bonus, the scheme covers any additional costs incurred. Check out their website for more details about dealing with travel firms in administration.


  • Kev
    Just a point to note.. Even when the value of goods is under £100, if you pay by Creditcard you could still attempt to get your money back. I've done this a couple of times in the past with great success. The most recent was for a magazine subscription that never got delivered. Despite the value of the goods being under £30, the creditcard company refunded the lot when I send evidence that no magazines were ever delivered (and the company in question were not speaking to me).
  • Alexis
    It's probably also worth noting that generally banks will initially try and prevent paying you either under the 1974 CCA or under a chargeback. You need to try again and again and harass them with phonecalls as they will hope you'll just give up at the first hurdle.
  • andyofyarm
    Harassment is a big earner
  • Jimmy
    "• the creditors (if the company has borrowed using its property/assets as security) • the insolvency folks themselves • the employees (for redundancy payments) • and finally – the customers And it’s usually in that particular order." Not quite. The insolvency folks take their professional fees first. What's left goes to the creditors. Call me a cynic, but you don't think all those lawyers and accountancy firms would get out of bed to do administration work if they ranked below the creditors, do you? (See under 'how do I make a claim?' on this page: )
  • Jimmy
    Oops, sorry - your 'the creditors' line referred specifically to secured creditors. My bad. 'The customers' refers to unsecured creditors. Forget my first comment :)
  • Mark S.
    Yeah that's all very well. I was recruited into a company a few months before my second kid was born (from a nice secure job) which then (6 weeks later) went tits-up owing me about 3 grand in wages. The company had "assets" etc, and it turned out that this amount was - quelle surprise - very neatly equal to the amount charged by the administrators. So they got their money alright, the rest of us got not a penny.

What do you think?

Connect with Facebook, Twitter, or just enter your email to sign in and comment.

Your comment