Can any one advise me on what happens if a company goes bankrupt when they owe you money

[pud1]

my mil and fil lent there sil some money to start a shop. He didn't pay it back so theyntook him to the small claims and won. He gave them 4 cheques for just over a grand each to be cashed at the beginning of each month. The first 2 was cashed but the 3rd has been stopped. They have called him and he said he could not afford to pay this month as he has had to find 16k but the next cheques will go through. They were prepared to accept this but they have since found out that he is massive financial trouble and on the verge of bankruptcy. Could any one p,ease advise. To what they need to do next and there chances of getting the cash back if he does go bust

If his company goes bust they'll join the list of creditors that includes everyone else he owes money or g to (suppl

So they have county court judgement against him? That will be helpful, however if he goes bankrupt then the first thing that happens is that the Offical Receiver (OR), probably through a 3rd party (a trustee in bankruptcy) will find out what his financial situation is. If he is truly insolvent ie his liabilities exceed his debts, then the court will make a bankruptcy order and the OR will take over his finances by selling his assets, then paying his secured creditors first (eg mortgagors), then unsecured creditors (eg your MIL and FIL) a proportion of what they're owed.

It may be that he has no assets at all, in which case they won't see much if anything unless he's working in which case they may receive a small amount back from his salary.

I haven't done bankruptcy practice for a long time, but think that he'll be discharged after just one year.

If his company goes bust they'll join the list of creditors that includes everyone else he owes money or goods to (suppliers, clients, bank, other investors etc). The administrator would sell off any assets (stock etc) then work out who to pay back and how much. The chances of them getting all their money back would probably be small. CAB may be useful for more info/advice.

Tax man will be Preferential Creditor, so any tax or VAT he owes will be paid first, then secured creditors eg bank loans etc (not his mortgage - he may be forced to sell his house if he owns it to put money in the pot). Whatever's left will be paid to the rest of the creditors at so much in the £.

Thanks all. Is there any course of action they should take now regarding the defaulted payment to try and recover the money before he does go bust

They could enforce it by sending the bailiffs in. If he has a house they could apply for a charging order against it then an order for sale so they get first dibs before he goes bankrupt.

So if they have Charge on his house would they have first dibs over the bankruptcy

Not that simple. Tax man STILL gets paid first. Then the majority secured creditor(s) - eg mortgage company, any loan companies he had secured the property with (in date/amount order), THEN your PIL. They will never have first dibs, unfortunately.

Tax man will be Preferential Creditor

Not since 15 September 2003 - do keep up

... and creditors secured by a fixed charge have always been paid before preferential creditors.

The most significant thing here is the title of the OP which mentions a company - is there a limited company here? Did your ILs lend the money to the company, or to their SIL?

Just realised I broke my rule of never to get involved with second-hand threads so I am dipping out now...

They lent I t to there daughter and sil. This was to Oder the shop up. The ccj is against both of them and. Not the shop name which is not ltd

They can enforce the order against anyone who isn't bankrupt. Must apply for a charging order asap.