The Seller Has Gone Bust — Can I Get My Money Back?
You paid for goods or services and the seller has gone into administration or liquidation before delivering them. Whether you can recover your money depends on how you paid.
Quick Answer
If you paid by credit card and the purchase price of the item was between £100 and £30,000, you are entitled to claim against your credit card provider under section 75 of the Consumer Credit Act 1974. The card provider is jointly and severally liable for the seller's breach of contract. If you paid by debit card, you can try a chargeback, though this is not a statutory right and has a much shorter time limit (usually 120 days from payment).
Full Explanation
When a seller becomes insolvent — entering administration, liquidation, or receivership — you become an unsecured creditor of the business. As an unsecured creditor, you are unlikely to recover anything from the insolvent estate, which typically pays secured creditors and preferential creditors first. However, the method of payment determines whether alternative recovery routes exist.
Section 75 of the Consumer Credit Act 1974 provides the most powerful protection. Where you paid by credit card for goods or services with a cash price of more than £100 and no more than £30,000, your credit card provider is jointly and severally liable alongside the seller for any breach of contract. The seller's insolvency constitutes a breach — they have failed to deliver the goods or services for which you paid. The s.75 claim is made directly against the card provider, who must pay you as if they were the seller. You do not need to register as a creditor in the insolvency; the claim runs entirely through the card provider.
For debit card payments, the mechanism is chargeback — a card scheme rule (under Visa, Mastercard, or Maestro rules) allowing the bank to reverse the transaction. Chargeback is not a statutory right — it is a rule of the card scheme and the bank has discretion. The key limitation is the timeframe: most chargeback claims must be made within 120 days of the payment date (some card schemes allow longer for anticipated delivery failures). There is also no minimum or maximum purchase price. If the goods were expected to arrive in the future and the payment was made more than 120 days ago, chargeback may not be available.
For PayPal and similar payment services: if you paid via PayPal, the PayPal Buyer Protection scheme may apply. Where PayPal deducted payment from a credit card, the s.75 argument can also be made directly against the credit card provider, though card issuers sometimes resist this.
If none of these routes apply (e.g., you paid by bank transfer, cash, or cheque), you may be able to register as a creditor in the insolvency proceedings, though recovery for unsecured trade creditors is typically nil or very small. You should also check whether the seller had a bond or insurance scheme covering advance payments (e.g., ATOL for holidays, deposit protection in some sectors).
Legal Basis
- §Consumer Credit Act 1974, section 75
- §Consumer Rights Act 2015 (goods/services quality)
- §Insolvency Act 1986 (creditor rights in insolvency)
- §Limitation Act 1980 (6-year limitation for s.75 claims)
What To Do
Identify How You Paid
Check your bank and card statements to confirm whether you paid by credit card, debit card, PayPal, or bank transfer. The recovery route depends entirely on the payment method. Note the exact amount paid and the date of payment.
Credit Card — Raise a Section 75 Claim
If you paid by credit card and the item cost more than £100 and up to £30,000, contact your credit card provider in writing. State that you are raising a claim under section 75 of the Consumer Credit Act 1974. Provide evidence of the purchase (order confirmation, payment receipt) and evidence of the insolvency (administrator's notice, company website down). The provider must investigate within 8 weeks.
Debit Card — Initiate a Chargeback
If you paid by debit card, contact your bank and ask for a chargeback. You will need to show the bank failed to deliver the goods or services and that you have tried to recover the money from the seller (or that this is impossible due to insolvency). Act quickly — most chargebacks must be initiated within 120 days of the payment or expected delivery date.
Register as a Creditor in Insolvency (as a Fallback)
Contact the administrator or liquidator (their details will be on the Companies House register and often on the company's website) and register your claim as a creditor. This is a fallback option as unsecured creditors rarely recover much, but it preserves your position and you will receive updates on the insolvency process.
Escalate to the Financial Ombudsman if the Card Provider Refuses
If your credit card provider rejects your s.75 claim or fails to respond within 8 weeks, refer the complaint to the Financial Ombudsman Service (FOS). The FOS is free, does not require legal expertise, and can order the card provider to pay. Refer within 6 months of the final response letter.
Important Deadlines
Important Warnings
Act quickly on chargebacks — the 120-day window passes fast and once it expires the bank has no obligation to pursue the claim.
For s.75, only the credit card provider you paid with is liable — not any intermediary. If you used a credit card via PayPal, the position is complex; seek advice.
Do not assume that paying via PayPal gives you s.75 protection automatically — card issuers dispute this in some cases.
Frequently asked questions
- Can I get my money back if I paid by credit card and the seller went bust?
- If you paid by credit card for goods or services costing between £100 and £30,000, you can claim under section 75 of the Consumer Credit Act 1974. Your credit card provider is jointly and severally liable for the seller's breach of contract. You do not need to register as a creditor in the insolvency; the claim is made directly against the card provider, who must pay you as if they were the seller.
- What can I do if I paid by debit card and the seller is insolvent?
- Yes, but it is not a statutory right. You can request a chargeback from your bank, which is a card scheme rule allowing the transaction to be reversed. The bank has discretion, and you must usually act within 120 days of the payment date. You will need to show the seller failed to deliver and that you tried to recover the money from them or that this is impossible due to insolvency.
- I paid by bank transfer or cash. Can I still claim my money back?
- If you paid by bank transfer, cash, or cheque, you may register as an unsecured creditor with the administrator or liquidator. However, unsecured creditors are unlikely to recover anything, as secured and preferential creditors are paid first. You should also check if the seller had a bond or insurance scheme, such as ATOL for holidays or deposit protection in specific sectors, which might cover advance payments.
- How do I start a section 75 claim with my credit card provider?
- You should contact your credit card provider in writing, stating you are raising a claim under section 75 of the Consumer Credit Act 1974. Provide evidence of the purchase and the seller's insolvency. The provider must investigate within 8 weeks. If they reject the claim or fail to respond, you can refer the complaint to the Financial Ombudsman Service within 6 months of their final response letter.
- Does section 75 protection apply if I paid using PayPal?
- The position is complex. If PayPal deducted payment from a credit card, you may be able to make a section 75 claim directly against the credit card provider, though issuers sometimes resist this. You should not assume automatic protection. If you used a credit card via PayPal, it is worth seeking advice to determine the best recovery route, as the liability may not be straightforward.