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How do I get my money back if a company goes bust?

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There are legal rights in place for consumers if a business closes down. Find out what they are and how they protect you and your money.
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If you have bought something from a company that has gone out of business, you may still be able to get your money back. The first thing you should check is its website to find out exactly what has happened.

When we talk about a company going bust, it could be down to one of several factors including:

  • Insolvency: This is when a business cannot pay off its debts

  • Liquidation: This is when a limited company has a legal obligation to stop operating. When this happens, its assets get redistributed

When a company cannot afford to pay its debts, the directors can choose to enter it into administration. This means legal ownership gets handed over to an insolvency practitioner or "administrator". They take over control of the business and its assets.

The company can continue trading under the administrator. But it could still be liquidated if it cannot pay its debts from its assets or further trading.

How do I make a claim?

First, check the merchant or retailer's website for details. Find out whether it has gone into administration or been liquidated. If it’s in administration – check who has been appointed as administrator.

If the company has new owners, you should be able to find their details on the website. If not, it will be on the Companies House register.

You will need to write to them to register your claim. In your letter you will need to explain the reason for your refund request, for instance if your goods weren’t delivered.

You are not guaranteed a refund, but by registering, you will be added to the list of people owed money and kept informed about the case. You are also permitted to vote at any creditors’ meetings.

Here is how to register as a creditor.

How do I get a refund?

Your first port of call should be the company you bought from, but if you’re unsuccessful and paid with a credit card, you should still be able to get your money back. 

If you paid by credit card and spent £100 or more, your purchase is protected under Section 75 of the Consumer Credit Act. This regulation means that the credit card company and retailer are both liable for purchases costing between £100 and £30,000. This protection applies even if the retailer or merchant is no longer trading.

That means if the retailer you bought from goes bust, you can go directly to the card provider to get your cash back. Even better, this applies even if you have closed your credit card account since the purchase.

That’s why it’s often a good idea to make big purchases with a credit card and then pay off the card immediately. Even if you only put part of the purchase (such as a deposit) on the card, you’re still covered.

Unfortunately, if you paid through a third-party app like PayPal, Section 75 may not apply.

Here is how to claim through Section 75.

You can also use Chargeback

Section 75 does not apply to debit cards, but you may be able to get your money back through something called the Chargeback scheme. 

With Chargeback, your card provider can reclaim your money from the retailer's bank. Chargeback is simply the reversal of the card transaction.

If the bank agrees with your request, the funds get withdrawn from the merchant's account and put back into yours. You can also use Chargeback on purchases made on credit cards for less than £100.

You have up to 120 days to make a claim using Chargeback.

Find out how Chargeback works.

You may be able to claim under warranty

If you have an item that is faulty, you should check the warranty or guarantee that came with the item to get it fixed or replaced.

You can also approach the administrators for a replacement, but this is not guaranteed.

How does this affect my vouchers and gift cards?

If you have unused gift cards or vouchers, they will count as credit owed by the retailer.

Sadly, the retailer or merchant is not legally obliged to give you a refund for the value of the voucher, but you still can and should ask. Check the website for details of the administrators and send them a letter with proof of your gift voucher(s).

If the vouchers were a gift and the gift donor paid by credit or debit card, they can put in a claim for a refund using Section 75 or Chargeback.

Alternatively, you might still be able to redeem or spend your gift cards if you’re quick. In some cases, if a retailer goes into administration, it may continue trading for a while in order to help pay back some of its debts.

If you’re able to go in-store to spend your gift card, that may be the quickest way to get the value from them. Otherwise, you’ll need to wait to get a refund, which may take a long time to come through, if at all. 

What do I do if a travel company goes bust?

Most package holidays are protected by ATOL or ABTA.

The Air Travel Organiser's Licence (ATOL) is a protection scheme run by the Civil Aviation Authority (CAA), which is a government body. It is specifically designed to protect people who fly.

Every UK travel company selling flight-based holidays must have ATOL status. If you have booked a future holiday through a travel company that goes out of business, you are entitled to a refund. If you are already on holiday when it takes place, you are entitled to hotel costs and flights home.

The ATOL Certificate is issued at the time of booking so you should check your confirmation when you need to make a claim.

If you booked a flight directly with the airline, it will not be protected under the ATOL scheme.

ABTA (formerly the Association of British Travel Agents) is the UK's largest travel association. ABTA covers package holidays bought in the UK that don’t include a flight, for instance holidays by rail, coach, cruise or ferry.

If your travel company goes out of business, you are entitled to a refund that includes hotel costs. This includes transport home if you are abroad at the time so that you can continue to enjoy your holiday. 

If you have not yet travelled, you can get your money back.

If you are on holiday and facing pressure from your hotel, you may have to pay and claim it back later. Make sure you keep all your receipts so that you can claim from ATOL or ABTA when you return home.

What if I am not protected by ATOL or ABTA?

If you used your credit card to pay towards your holiday, you can use Section 75 to claim it back. This applies even if you only used the card for a small amount, such as the deposit. In fact, Section 75 applies even if you put just £1 on the credit card and paid the rest by another method. The only requirement is that the total booking costs between £100 and £30,000.

If the booking cost less than £100, you may be able to get a refund through your card provider using the Chargeback scheme.

Check your travel insurance. Not all policies will cover companies going bust, but some do. Look carefully through your documents - especially if you are not covered by ATOL or ABTA.

If you booked a destination wedding, you should check your wedding insurance documents.

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About Salman Haqqi

Salman is our personal finance editor with over 10 years’ experience as a journalist. He has previously written for Finder and regularly provides his expert view on financial and consumer spending issues for local and national press such as The Express, Travel Daily, and The Daily Star.

View Salman Haqqi's full biography here or visit the money.co.uk press centre for our latest news.

About Salman Haqqi (personal finance expert)

View Salman Haqqi (personal finance expert)'s full biography here or visit the money.co.uk press centre for our latest news.