It is not something we like to think about, but with the recent Monarch Airlines news, of the company going bust, it is something we need to be aware of; what are our rights as consumer should a company we do business with goes bankrupt???
Bankruptcy can be a complicated issue, for consumers and for a business.
So what is bankruptcy?
Bankruptcy is a formal declaration that an individual or company is insolvent.
You can be insolvent without going bankrupt, however, if you go bankrupt, it is due to being insolvent.
Bankruptcy is where a person or company files a petition with the courts, declaring their insolvency, and in essence, asks the courts to intervene on their behalf and aid them in sorting out their finances.
Bankruptcy is not something to be entered into lightly, and you should get professional advice.
In bankruptcy, an Official Receiver is appointed, and their job is to review the petitioner’s finances, look at any assets they may have, who they owe, and how much they owe, and see if there is anything that can be liquidated to repay the creditors. Even if it is just a few pence on the pound.
In some instances there may be options to avoid bankruptcy. It can depend on the individual, or company’s full situation.
And there are ramifications from an individual or a business going bankrupt, there is a trickle own effect.
Our Rights as Consumers
When someone or a company goes bust it is not a lone venture; they unfortunately bring others into their bankruptcy. Inadvertently, but just the same.
No ship sinks alone, not to make jest of a serious matter.
But the fact is if you owe someone money and go bankrupt, they will feel some affect from it. So will clients and customers of a business that goes bust.
If you look at the Monarch Airlines situation, many travellers and holiay makers were left stranded abroad, and had to be bought back home.
If you as an individual go bankrupt, anyone you owe money to, be it a bank, credit card company, whomever, will feel the affect of the bankruptcy. The affect they may feel is that they may not get paid.
In bankruptcy the Official Receiver reviews your finances and assets and looks to see if you have anything of value that can be liquidated to pay those you owe money to.
They also look to see if you have any surplus income to be used to pay into the bankruptcy.
The same is true if a business goes bankrupt.
The main difference between an individual bankruptcy and a large company going bankrupt can be the number of people they owe money to.
As a consumer or client of the company going bankrupt, you may be owed money you paid for a service or product that was not delivered, but you may also be a small fish in a large pond, or cean of those who are owed money.
However, as a consumer we do have some rights should this occur, but they are not many.
Section 75: This refers to Section 75 of the Consumer Credit Act, which is in essence a way for us to recoup what we paid for a product or service, if we used a credit card. There are conditions for this, such as amount paid, was it a deposit, or payment in full, etc.
There can be many “grey areas” regarding Section 75, but for some people, should a company they are doing business with goes bankrupt, it does give them some recourse.
As to other options or rights, after Section 75, it gets slim my friend, I am sorry to say.
If your issue is about a holiday, and the operator is ATOL protected, them you may have some recourse to get your money back.
In addition, if your travellers insurance policy covers insolvency, which many do not, you would have some protection there.
However, after this, your rights again become slim. You can file a claim against the company, but again you may be a small fish in a large insolvency pond.
Is there anything we can do to protect ourselves against such a loss, not rally.
* Deal with reputable companies, but even they can go bust.
* Look at what insurances may be available, such as if your travel insurance policy covers insolvent operators.
* Pay by credit card, as this can offer some protection.
It is just a fact of doing business with someone, they may go bankrupt. You cannot request to see financial statements on all the businesses and companies we may work with.
And the facts and odds are relatively low that we will be in that situation that we could loss money from a company going bankrupt.