Proof of Debt in Liquidation: What It Means for Creditors

Unfortunately, not all businesses work out, this is just a matter of fact. A lot of organisations start with the right intentions and with a good idea in mind but factors come into play that make it so that things simply do not work out. When this is the case, a company will become insolvent and will likely go into liquidation. If that happens then creditors interests need to be protected, meaning they get repaid as much of their debt as possible. Of course, in order to receive payments on that debt, creditors also need to prove that said debt exists. This is where proof of debt comes into play.

What Is a Proof of Debt in Liquidation?

The starting point needs to be establishing what proof of debt actually is. It is essentially a document which records a creditor’s claim throughout an insolvency. If a proof of debt form isn’t completed then a creditor is not going to be recognised in the insolvent estate. The overriding effect of this is that the creditors are not going to be able to:

Vote on the appointment of an Insolvency Practitioner who is responsible for the insolvency

Vote on any decisions that creditors might be invited to participate in

Become a member of a Creditor’s Committee

Crucially, participate in the distribution of any of the assets of the insolvency to creditors

Because of the above, creditors need to ensure that they submit proof of debt to the insolvency practitioner once one is appointed. Insolvency Practitioners will be able to help you do this so just get in touch and find out.

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