If you’ve ordered goods from Made.com, you might be feeling slightly queasy reading the news, which suggests the retailer is on the verge of going bust. At the time of writing, the Made.com website simply states that the firm is not taking any new orders. But it’s been widely reported in the news that the business is in trouble, after failing to secure a buyer.

Regular shoppers may also be feeling a distinct case of déjà vu too, as first high street retailers then online shops have been biting the dust as a result of a combination of tough trading conditions, competition, costs and shifting consumer demand. According to the Centre for Retail Research, so far this year 19 retailers have gone under, leaving just under 30,000 people out of work.

When a business is in trouble, the golden rule is claim back money you’ve spent as soon as possible and spend your vouchers before they become worthless. The problem with that approach is it can be the catalyst that tips a business over the edge once and for all. After all, if 50,000 people all attempt to recall money they’ve spent, it’s not going to be good for the balance sheet. Ultimately, that’s a moral debate we have to have with ourselves. Because when a retailer goes bust, chances are you’ll lose your cash.

Here’s my guide to your rights if you’re worried about a business going in to administration or liquidation.

Liquidation or administration?

We use a wide variety of terms to describe what happens when a business goes bust. However, because the process is different for the two main options – liquidation and administration – it’s not always clear if the business is no more.

Liquidation is where a business is formally closed and its assets are ‘liquidated’ (sold off). This happens when a business can’t be saved, or alternatively, if the owners of the company just want to shut down the business.

Administration is where there’s a possibility of a business continuing in some form or another, including being rescued or purchased. Once placed in administration, the administrator steps in and comes up with plans to keep the company running while assessing the options. This means that the business is continuing to operate, albeit in a limited form. Administration favours people who are attempting to get refunds slightly more, though in practice, this can still be tricky.

When retailers go under

Officially, when a retailer goes bust you join the long list of creditors who are owed money by the business. In reality, you join the back of a very long queue. Speaking frankly, it’s very rare to actually get any cash back when a firm has gone in to liquidation or failed administration. So for most people, when the closed sign goes on the door – for whatever reason – any cash you’ve paid along with vouchers and gift cards vanishes even if you’ve not had the goods.

However, the process of a firm going bust isn’t usually instantaneous. There’s often a window of opportunity where you can quickly spend the voucher or recall card payments before the firm goes under.

There’s no way to definitively prepare for this. You just have to keep an eye on the news and remember what vouchers and store credit you have. Sometimes the administrators of the company will allow you to spend the voucher or card – or may even honor them. But the rule of thumb is this – if you hear a firm is going under, spend the store credit.

Vouchers and gift cards

A voucher is a piece of paper that entitles you to buy goods or services up to a certain prepaid amount – though many exist in virtual forms these days. Vouchers can be bought as gifts or issued in lieu of a refund, for example, by a shop if you’ve decided you don’t like the goods you’ve bought or been given.

Vouchers usually have an expiry date printed on them and you must ‘use it or lose it’ by this date. Many vouchers meet this fate moldering in wallets and purses across the land. This is why businesses like them – people forget to cash them in. If you have a voucher, put a reminder note in your calendar at least a month before the expiry so you don’t lose out.

Gift cards work in a similar way to vouchers (and are almost exclusively purchased as gifts, as the name suggests). Again, they should have clear expiry dates on them, though there have been disputes in the past about these rubbing off or not being very clear. If you’re making a complaint about a gift card then the purchaser usually has to raise the problem with the retailer.

If you have a gift card or voucher with a retailer who is reportedly struggling, then if they have a high street shop get down there as soon as you can and spend the credit. At least that way you can walk out with goods. Spending online leaves you at the mercy of the firm going bust mid-return.

When a retailer gets taken over

In the past there was a general assumption that when a business was purchased or rescued by another party after verging on bankruptcy, gift cards and vouchers would be honoured if the firm continued to trade.

In recent years, this has been far from straightforward. I’ve seen some cases where the business that purchased a defunct brand announced that gift cards and vouchers would be honoured or reissued. In practice, this process took a considerable period of time – or didn’t happen. So don’t assume that any outstanding credit or money owed will transfer over to the new owner of the business – even if the brand is relaunched.

Returns and refunds

Things get even more complicated if you need to return goods or replace faulty items. Often this is at the discretion of the administrators of the defunct firm. Once again, speed is of the essence here. You may be able to ask your bank or card provider to ‘charge back’ your money for undelivered items or pending refunds. Don’t hesitate.

Charge back is an agreement between banking service providers where people who have paid for goods or services on debit or credit cards can ask for their bank to ‘charge back’ their money if the firm doesn’t deliver, has debited you without permission, or looks like they might go bust.

Call the bank or card provider and explain that you’ve heard about the problems with the business and ask them to charge back your cash as soon as possible. Sometimes you’ll be asked to fill out a form for charge back requests, but when a firm faces liquidation the bank or card provider should recall the money as a priority – so make sure they understand why you’re asking for your money back.

Returning goods can be a real minefield. You’ll need to make a pragmatic decision about whether you want to risk returning faulty items to the retailer, because if they go in to administration during the returns process, you’ll probably lose your cash, unless the business is willing to refund you straight away. If there is a separate manufacturer of the goods, then it might make more sense to negotiate with them directly.

Goods and services bought on a credit card

Regular readers of Times Money Mentor will know that people paying for goods or services by credit card have even more rights, thanks to the single most useful piece of consumer legislation (in my opinion): Section 75 of the Consumer Credit Act.

If you pay for goods or services on a credit card that cost between £100 and £30,000, the credit card provider is jointly responsible, along with the supplier of the goods or services, for any breach of contract or misrepresentation. This can involve goods not turning up, items that are damaged or don’t do what they are supposed to do or situations where you’ve been misled by the supplier. Most importantly, this includes when a firm has gone bust.

You’re even covered if you’ve only paid for a deposit for something on your credit card – and in theory, that deposit amount can be under £100 as long as the total cost of the goods is between £100 and £30,000. In cases like this you’re still covered for the whole value of the item in question. So if you pay a £100 deposit for a sofa that costs £2,000 on your credit card and the rest in cash, if the firm goes in to liquidation the card provider would in theory have to pay you the full £2,000. In fact, the wording around deposits is pretty unclear, so in theory, even if you’d paid a pound on deposit, you might be covered.

Featured in Times Money Mentor – Martyn James

What are your refund rights when a retailer collapses?

Please share me around

Share useful info with your friends