3 things to do when a client files for bankruptcy

When a client files for bankruptcy, it can feel like the money they owe you has disappeared overnight. You may have supplied goods, completed work, paid staff, covered materials and waited for payment, only to find out the client has now entered a formal insolvency process.

The first thing to remember is that bankruptcy usually applies to individuals and sole traders. If your client is a limited company, the process is more likely to be liquidation, administration or another company insolvency route.

That difference matters because your next steps may change depending on who owes the money and what formal process has started.

In March 2026, there were 2,022 registered company insolvencies in England and Wales. The company insolvency rate in the 12 months to 31 March 2026 was 51.6 per 10,000 companies, equal to around 1 in 194 companies entering insolvency. There were also 12,252 individual insolvencies registered in England and Wales in March 2026, which was 30% higher than March 2025. 

If your business is owed money, here are 3 practical things to do straight away.

1. Confirm the insolvency position

Before you take any further action, confirm exactly what has happened. Do not rely only on a short email from the client saying they have “gone bankrupt”. You need to know whether there is a bankruptcy order, individual voluntary arrangement, debt relief order, liquidation, administration, company voluntary arrangement or another formal process in place.

Once a formal insolvency process has started, normal chasing may no longer be appropriate. Repeated calls, payment demands or threats of legal action could cause problems if the matter now needs to go through the official receiver, trustee, liquidator, administrator or insolvency practitioner.

This is where professional help can make a difference. A specialist debt recovery agency can help you understand what kind of debt you are dealing with and whether recovery is still possible. If the matter has reached a formal insolvency stage, Taurus Collections can also support you through insolvency services.

You should pull together your documents as soon as possible.

• Check the client’s full legal name and trading name

• Keep copies of all unpaid invoices

• Save contracts, purchase orders and written approvals

• Keep delivery notes or proof that work was completed

• Record any part-payments already received

• Save emails, messages and payment promises

• Note any disputes raised before insolvency

This gives you a clear evidence file if you are asked to prove the debt.

If the client is not yet formally insolvent but is ignoring payment requests, you may still have time to act. In England and Wales, a creditor normally needs to be owed at least £5,000 to apply to make an individual bankrupt. For company winding-up action, the debt must usually be at least £750, and you must be able to show the company cannot pay its debts.

You may also want to review whether statutory demands and insolvency could apply before the situation gets worse.

2. Submit your claim properly

Once you know who is managing the insolvency, contact them quickly and ask how to submit your claim. This is often called lodging a proof of debt. It tells the insolvency practitioner how much you are owed and gives them the evidence needed to review your claim.

Do not assume you are already included just because you sent invoices before the client became insolvent. If you want your debt considered, you need to make sure it is formally recorded.

Your claim should be clear and organised. Set out the total amount owed in £, the invoice dates, the goods or services supplied, any payments received and any supporting documents.

You should also check whether you have any stronger position than an ordinary unsecured creditor. For example, you may need to consider whether you have retention of title terms, a personal guarantee, security over assets or any right of set-off.

In many insolvency cases, unsecured creditors receive only part of what they are owed. Sometimes, they may receive nothing. That does not mean you should ignore the process, but it does mean you should be realistic and act quickly.

If interest, charges or recovery costs may apply, review your position carefully. Taurus Collections can help businesses understand reclaiming costs and interest where a commercial debt has been paid late.

If the client disputed the invoice before becoming insolvent, you should also keep a full record of the disagreement. Support may be needed for contested debts and disputes if the debt is challenged by the client, insolvency practitioner or another party.

This is also a good time to review what happened before the insolvency. If the client was already avoiding payment, a formal late payment demand letter may have helped before the position became more serious.

Once insolvency has started, the focus usually moves from pressure to process. Before that point, early action can give you more options.

3. Review your wider credit control process

A client bankruptcy should not only be treated as a one-off bad debt. It should also make you look at your wider payment process.

Ask yourself whether there were warning signs. Did the client start paying late? Did they ask for longer terms? Did they avoid calls? Did they keep promising payment without giving a firm date? Did they increase orders while old invoices remained unpaid?

These signs do not always mean a client is heading for bankruptcy, but they should make you cautious.

Strong credit control helps you deal with these risks earlier. With outsourced credit control, you can keep invoice chasing consistent, professional and structured before debts become harder to recover.

You should also consider credit checks before giving large credit limits or continuing to trade with a slow-paying client. UK and international credit checking can help you make better decisions before your exposure grows.

If a client has disappeared, changed address or stopped responding before insolvency is confirmed, debtor tracing services may help you find the right individual, business or contact point.

You may also want to review your terms of business. Clear payment terms, written acceptance, signed contracts and a defined escalation process can all make debt recovery easier.

Your process should include:

• Agree payment terms before work starts

• Send accurate invoices on time

• Follow up before the due date

• Act quickly when payment is missed

• Keep clear records of every promise to pay

• Credit check higher-risk clients

• Escalate old debts before they become unmanageable

If you need support, it is worth understanding debt collection costs before deciding what to do next. A no win no fee debt collection approach may also help you take action without paying large upfront recovery costs.

Do not wait until it is too late

If a client has already filed for bankruptcy or entered insolvency, your options may be limited. However, you should still confirm the position, submit your claim and protect your business from further exposure.

If the client has not yet entered a formal insolvency process, but they are ignoring invoices or repeatedly delaying payment, you may still have time to act. Taurus Collections provides debt collection UK support to help businesses recover unpaid invoices before they turn into serious bad debt.

The earlier you act, the more options you usually have. Waiting too long can turn a recoverable invoice into a loss.

If you are worried about a client who has filed for bankruptcy, entered insolvency or stopped paying altogether, contact Taurus Collections today. The team can review your situation, explain the practical recovery options and help you take the next sensible step.