I recently have received a few questions from people regarding a certain and unnamed loan company, going into Administration, and will in all probability be liquidated; meaning they will go bust.
The big question is if the company does go bust, do I still owe them money???
And The Answer is……
The loan and your liability for the debt does not magically go away just because a company goes bust.
Administrators and Liquidators
Isn’t that a song?…..
When a company, any company, be it a loan firm, a construction company, any company can no longer handle their finances or meet their obligations, they file with the courts, just like Bankruptcy, and go into Administration. Think of this as a pre-bankruptcy.
If the Administrators who are appointed can find a way to salvage or save the company, they will. If not, then the company goes into liquidation. This is where assets are sold to pay off the company’s debts.
Assets To Be Sold
Oddly enough, your loan to the bank or loan company is an asset.
Assets come in many forms, such as equipment, cars, buildings, receivables such as loans, office furniture, etc.
Did you see how I sneaked in your loan?
Your loan is an asset, a receivable that is money to come into the company that is now defunct.
If the loan company has enough of these loans to be sold, it is an asset, and another company may buy these loans. When the loans are sold/bought, you now owe the new company the same loan you had with the other, now gone company.
So now the next question I get is….
What If I Do Not Pay The New Loan Company?
Then you are in default.
Debts and accounts are sold on a regular basis, and you still owe the debt regardless of who owns it.
If you do not pay the new lender or loan company, they can use all the collection tools we have here in the UK to collect the account, and if you owe more than £5,000, they can make you bankrupt.
So while hearing the company you owe money is going bust may sound like music to your ears, that music will be of a dissonance nature and not harmonic.