Insolvency for creditors

Am I a creditor?

You are a creditor of a company if the company owes you money. Usually, a creditor is owed money because they have provided goods or services, or made loans to the company. An employee owed money for unpaid wages and other entitlements is a creditor. A person who may be owed money by the company if a certain event occurs (e.g. if they succeed in a legal claim against the company) is also a creditor, and is sometimes referred to as a ‘contingent’ creditor. There are generally two categories of creditor:

  • secured, and
  • unsecured.

A secured creditor is someone who has a ‘charge’, such as a mortgage, over some or all of the company’s assets, to secure a debt owed by the company. Lenders usually require a charge over company assets when they provide a loan. An unsecured creditor is a creditor who does not have a charge over the company’s assets.

Is the company I am dealing with in financial trouble?

Signs that may indicate the company you are dealing with is in financial trouble include continued late payment of invoices, dishonoured payments or the issuing of post-dated cheques.

What are my options if I believe a company is in financial trouble?

If you suspect that a company is in financial difficulty, you should first try and raise your concerns with the company. If this fails to resolve your concerns, your options include:

  • reviewing ongoing trading arrangements
  • seeking legal advice.

More information

For further information about insolvency - go to Australian Restructuring Insolvency and Turnaround Association (ARITA).

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Last updated: 23/03/2016 03:13