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

Written by Salman Haqqi, Senior Personal Finance Writer

7 October 2019

There are legal rights in place for consumers if a business closes down. Find out what they are and how they can protect you and your money.

Worried woman on phone

If you have bought something from a company that has gone out of business, you can still get your money back. The first thing you should check is their website to find out exactly what has happened.

When we talk about a company going bust, it could be down to one of the following.

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.

If a company cannot pay its debts it can enter the company 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 can 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 who is appointed as administrator.

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

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.

You are not guaranteed a refund but by registering, you will be kept informed of 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?

You can use Section 75 even if the retailer or merchant is no longer trading.

The first thing to check is the payment method used for the voucher. If you paid by credit card, your purchase is covered 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.

If the retailer you bought from goes bust, you can go directly to the card provider for your refund. This applies even if you have closed your credit card account.

But if you are signed into a third-party app like Google pay or 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 with 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 gets withdrawn from the retailer'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 of 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?

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

Unfortunately, the retailer or merchant is not legally obliged to give you a refund for the value of the voucher but you can still 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.

What do I do if a travel company goes bust?

Most holidays are protected by ATOL or ABTA.

Air Travel Organiser's Licence (ATOL) is a protection scheme run by the Government operated by the Civil Aviation Authority (CAA). It is specifically 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 booking 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. Under ABTA, holiday makers are covered for holidays bought in the UK that don't include flights like train journeys or cruises.

If your travel company goes out of business, you are entitled to a refund which 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 it for the deposit. The only requirement is that the total booking cost at least £100.

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 you should check 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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