Can You Recover Debt from a Defunct Company? What to Know About Insolvency and Liquidation
Jul 01, 2025
When a company that owes you money suddenly goes into liquidation, it can feel like the end of the road. Directors vanish, communication stops, and the assumption is that the debt is now unrecoverable. But insolvency does not always mean your claim is lost. With the right strategy, creditors can still recover substantial sums, even from defunct businesses.
At Payfor, we regularly support clients facing this exact scenario. Our work with insolvency practitioners, legal experts, and international networks allows us to identify the true prospects of recovery, even when a company is winding down.
Understanding Insolvency vs Liquidation
Insolvency occurs when a company can no longer pay its debts as they fall due. Liquidation is the formal process of winding up a company’s affairs, selling off assets, and distributing the proceeds to creditors in a set priority.
There are different types of liquidation, including voluntary and compulsory. Each has legal implications for how creditors are treated, and what must be done to file a claim. Importantly, just because a company is in liquidation does not mean creditors are powerless. Quite the opposite, it often means the legal process is underway, and deadlines to act are imminent.
What Creditors Can Do
Creditors need to move quickly and strategically. Submitting a valid claim to the appointed liquidator is the first step. If you have a secured interest, such as a retention of title or registered charge, your position improves. However, unsecured creditors can also recover funds, especially when there are recoverable assets, fraudulent trading claims, or director misconduct.
Payfor helps clients establish their creditor status, gather and formalise documentation, and communicate professionally with liquidators to ensure their claim is taken seriously.
What Happens When the Company Is Abroad?
Many debts involve counterparties based overseas. When a foreign company becomes insolvent, the path to recovery can become even more complex. Local insolvency laws differ, and so does the priority of claims.
This is where Payfor’s global infrastructure is critical. Our team works with insolvency professionals in multiple jurisdictions to ensure your interests are registered promptly and accurately. We understand which countries allow foreign creditors to participate and how to navigate those legal systems with confidence.
Investigating Director Conduct and Hidden Assets
In some cases, insolvency is not the end of the story just the beginning of an investigation. Directors may have transferred assets out of the company before liquidation, misrepresented the business's position, or taken actions that leave them personally liable.
Payfor conducts intelligence-led investigations into these matters and works with lawyers to determine whether legal action against directors or connected companies is viable. In certain cases, we can help trace funds, freeze accounts, and recover value even when a company no longer trades.
Settlements, Negotiation and Professional Leverage
Not every insolvency process requires courtroom drama. In many cases, Payfor acts as a professional intermediary, contacting directors or legal representatives, and opening channels for without prejudice settlement discussions. Our team understands the tone and approach needed to encourage resolution without increasing reputational or legal risk for either party.
This type of professional negotiation is often where Payfor adds the most value, knowing how to apply pressure without hostility, and sensing when a pragmatic deal can still be done.
Partner with Payfor for Complex Recoveries
Payfor has deep experience in insolvency-linked recovery across industries and jurisdictions. Our work with law firms, insolvency practitioners, and forensic teams allows us to pursue debts others cannot. Whether the entity is based in London, New York, Dubai, or Hong Kong, our global structure ensures creditors are never alone.
From supporting claims during insolvency proceedings to investigating director conduct and enforcing judgements, Payfor helps turn closed doors into recovery opportunities.
If your business is owed money by a defunct or dissolving company, contact us to discuss your options in full confidence.
Disclaimer:
This blog post is intended for informational purposes only and should not be construed as legal advice. The information provided in this post is based on general principles and may not apply to specific legal situations. Laws and regulations vary by jurisdiction and can change over time. Readers are advised to seek professional legal counsel before making any decisions based on the information provided in this blog post. Payfor Ltd is not a law firm and does not provide legal services. The company disclaims any liability for actions taken based on the contents of this blog post.
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