When firms go bust 

12/10/2017 Flight cancellations and delays have been all over the headlines. Resolver has advice.

If you’ve recently booked a holiday, you’d be forgiven for glancing nervously at the news. Flight cancellations are still making headlines, and now the collapse of Monarch airlines has left hundreds of thousands of people wondering what will happen with their travel plans.

It can be a real shock when businesses go bust. Many of us assume that a large business is less likely to collapse, but I’m afraid that size is no guarantee that our money is safer.

Here’s some advice on what to do if you find yourself affected by a firm going bust – and how to avoid future problems as far as you can.

Airline failures

When an airline collapses, the regulator of the industry – the Civil Aviation Authority (CAA) – will swing into action if you’re already abroad and in need of help. They’ll usually publish information on their website explaining what will happen when it comes to getting you home, keeping you in accommodation, and what you need to do next. You can find out more of the CAA’s advice concerning Monarch here.

If you’ve booked a packaged holiday, it’s likely you’ll have ATOL protection. ATOL is an industry scheme set up over forty years ago to protect people in this kind of situation. You should contact the business that you booked your holiday with, who’ll talk you through your rights. If it’s a Monarch package, the CAA will explain what you need to do next. Find out more about ATOL here.

If you’ve still got questions, check out this guide from our friends over at MoneySavingExpert – it’s regularly updated with new information.

The business has gone bust – how do I get my money back?

The past few years have seen some pretty big names bite the dust, from high street retailers to airlines.
 
Here’s a quick overview of what ‘going bust’ means and a few tips on how to get your money back – and what to beware of if you’re making a significant purchase.  

Boom or bust? 

There are loads of technical terms that can be applied when a firm ceases trading. Don’t worry about these too much – the key thing is to act quickly. The longer you wait, the harder it becomes to get your cash back.

Liquidation is the process where a business is ‘wrapped-up’ and its remaining assets are redistributed to the people and businesses it owes money to.  It’s a very bureaucratic procedure with lots of rules governing it, but it can take some time. A business can cease trading or be sold on without having to file for liquidation. It can go also into administration – which basically involves bringing in people to keep the business running and help it survive.
 
When a firm goes bust owing you money, goods or services, then you join a queue of people known as creditors. As a consumer, you’re generally last in the queue for cash, and, in practice, there’s little money left once investors, employees and insolvency fees have been paid.

How do I get my cash?

First things first – check to see if you have any statutory protection through schemes organised by regulators. These vary and can involve ATOL for packaged holidays, or the Financial Services Compensation Scheme (FSCS) for financial firms. If a big firm goes bust, Resolver will tell you who’s best to contact.
If you’ve paid by credit card: You’ve got lots of statutory protection if you pay for goods or services using a credit card. There’s a nifty law called the Consumer Credit Act that says that you could claim money back from your card provider if you use a card to pay for things that cost over £100 and less than £30,000. You don’t even need to have spent the whole amount on the card as long as the deposit falls within the limits. This is known as making a claim under ‘section 75’. Credit providers aren’t really thrilled about this, as they can end up forking out for businesses that go bust, but it’s your first line of defence.
If you’ve paid by debit card: It’s not a legal right, but many card providers run a scheme called ‘chargeback’, which means you might be able to ask them to recall your money if there’s a problem. These schemes all have slightly different rules depending on the service provider. But act quickly: if a firm has already gone bust it may be too late. Give the debit card provider a call and ask them to charge back the money as soon as possible.

If you’ve paid electronically (PayPal, Skrill, etc): Using electronic money services like PayPal also gives you some rights, so lodge a claim using the firm’s dispute resolution rules. As with credit and debit cards, you can go to the Financial Ombudsman Service for free if you’re still unhappy with the way the claim is handled.

Insurance: If you have a problem with a holiday firm going bust, you might want to check your travel insurance documents. Unfortunately, the majority don’t cover firms going bust – which comes as a surprise to many people. Where there is cover, we’ve heard of some people being bounced back to card providers or ATOL by their insurers. While you should try this regardless, there’s no reason why you can’t claim on your insurance policy so don’t be dissuaded. Of course, you can’t get ‘double compensation’ – you won’t get more cash from your insurer if ATOL pays out .
Other payment methods: If you’ve paid by cash, cheque or direct transfer, you’ve got no right to recall your money if a firm goes bust. Always question businesses that ask for payments this way and don’t pay if you can’t afford to lose it
Vouchers and gift cards: If a firm goes bust, then often any vouchers you may have with them become invalid. They are generally treated as cash you are owed. Some firms that have gone into administration have honoured their vouchers. But if you hear rumours that a business is in trouble, don’t delay – use your vouchers and gift cards before it’s too late.

What about smaller firms?

If the firm that has gone bust is a smaller business and isn’t covered by a regulatory scheme, speak to your local Trading Standards officer – they’re based in your local council offices. They can let you know if there’s a wider problem and can investigate the business if they think there’s a cause for concern.
 
The best way you can protect yourself is to keep your eye on the news. If it sounds like a firm is in trouble contact them asap. But act quickly – it’s the best way to safeguard your hard-earned cash