Insolvency: what a creditor should do
A debtor's insolvency is the scenario every creditor fears — and rightly so, because the amount recovered is usually only a fraction of the claim. Yet even in an insolvency situation, the creditor's own conduct matters a great deal: how early you spot the problem and how precisely you act in the proceedings directly shapes the outcome.
The first warning signs
Insolvency rarely arrives overnight — it almost always sends advance signals that an attentive creditor can pick up months in advance. The most typical ones:
- payment discipline deteriorates gradually — first by a few days, then weeks, then months;
- the debtor starts making small partial payments "to keep the relationship going" while the total debt keeps growing;
- communication changes: promises become evasive, the responsible staff are replaced or simply stop responding;
- public registers start showing tax arrears, pledged assets, board changes or enforcement notes from other creditors;
- the debtor unexpectedly asks to amend contract terms or to novate the obligations to another company.
If several of these signals appear at the same time, there is good reason to act immediately rather than wait for "one more promise".
Why it matters to act before proceedings are declared
Most of the money is recovered not during insolvency proceedings, but before them. While the debtor is still operating, you can still agree on payment, a payment schedule, additional security or a restructuring of the debt. Once proceedings are declared, individual agreements are no longer possible — the creditor becomes one of many, and recovery depends on the debtor's estate and the ranking of claims.
So when warning signs appear, it pays to assess the debtor's financial position quickly and secure the most enforceable agreement possible while it still can be done. At the same time, you must act with legal precision: transactions concluded shortly before insolvency can be challenged in the proceedings, so any solution has to be structured to withstand the administrator's scrutiny as well.
Filing your claim: the deadline is decisive
If insolvency proceedings are declared after all, the creditor's first and most important duty is to file its claim with the administrator within the statutory deadline. That deadline is short, and missing it carries severe consequences — a late-filed claim can significantly restrict the creditor's rights in the proceedings or bar participation altogether. The claim must be supported by documentation: contracts, invoices, deeds, correspondence. The more precisely the claim is prepared, the smaller the chance that the administrator will contest it or admit it only in part.
The creditor's role in the proceedings
Insolvency proceedings are not just a wait for distributions — creditors have real means of influence. The creditors' meeting decides matters essential to the process, and voting rights are proportional to the admitted claim. In larger proceedings creditors can act in concert, supervise the administrator's conduct, scrutinise the terms on which assets are sold and, where necessary, object to decisions that harm the creditors as a whole. An active creditor who follows the process and reacts in time is always in a better position than a passive one.
Realistic expectations about recovery
An honest answer: recovery rates for unsecured creditors in insolvency proceedings are usually low, because the costs of the proceedings and the claims of secured creditors are covered first. That does not mean participation is pointless — a filed claim preserves your rights, entitles you to a share in the distribution and gives you a voice in the process. But it confirms the central lesson once more: the best time to protect your claim is before insolvency, not during it.
Conclusion
A creditor's strategy towards a debtor in financial distress comes down to three steps: spot it early, reach an agreement fast, and participate properly in the proceedings if they begin after all. At each of these steps, professional support materially increases the amount recovered.
B Capital offers a free initial assessment — if your debtor is showing signs of insolvency, or proceedings have already been declared, we will evaluate your options and recommend the next steps. Get in touch →