Proof of debt is important when collecting from insolvent businesses

On Behalf of | Jun 27, 2020 | Firm News |

There are challenges when a company tries to recover debts. One of the most difficult situations for businesses trying to recover debt from insolvent companies is the proof of debt. An important step in that process is proving the debt you are owed if a company that is already insolvent.

Full debt collection might not be possible without proof of the debt

One of the most important steps in collecting a debt from an insolvent company is proving the debt. That is done by filing the proof of debt. This is a document that gives you the right to make a claim on the estate.

The first step in this process is a liquidation letter, notifying you of the insolvency.  After you receive the letter, you must submit your proof of debt. If you cannot prove the debt, you are not likely to receive compensation. The money owed you can include present, future or contingent debt.

Your claim will be rejected or reduced

After your proof of debt is submitted, the liquidator can accept the debt, reject it or ask you for more evidence. Rejection does not mean your claim is final. You can appeal the rejection in court.

You must file the proof of debt with the court. Your claim is then either rejected or reduced if you cannot provide evidence. All claims against an insolvent company must be proved.

The proof of debt must include a just estimate of the debt and support documents. That can include:

  • Credit/debit notes
  • Receipts
  • Vouchers

If there are assets to be distributed, and you file the proof of debt, you could have a claim.


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