When a customer goes into liquidation owing you money, stop supplying them on credit today, confirm the liquidation and the liquidator’s claim deadline, and lodge your claim on time. Check whether a registered security or construction retention puts you ahead of the queue, write the debt off to claim back the GST, and line up funding so their failure doesn’t drag your business down with it.
That’s the short version. The longer version matters, because the first fortnight after the email from the liquidator is when most of your options are won or lost.
Why this is happening to so many good businesses
If this has landed on you, you’re far from alone. Credit bureau Centrix reported close to 3,000 company liquidations in 2025, the most since 2010, with construction, manufacturing and hospitality among the hardest hit.
Every one of those liquidations leaves a trail of unpaid suppliers, subcontractors and service businesses behind it. Many of them did nothing wrong. They delivered the timber, did the fit-out, ran the payroll software or cooked for the function, and the money simply never came.
It’s normal to feel angry, embarrassed or a bit sick about it. Give yourself an afternoon for that. Then work through the steps below in order.
First 48 hours: confirm, stop and gather
Confirm the liquidation. Search the customer on the Companies Register. A company in liquidation shows that status, and the liquidator’s name is usually listed. Liquidators also give public notice of their appointment, often in the New Zealand Gazette, along with the date creditors must claim by.
Stop credit supply. Don’t release more goods or start more work on account. If the liquidator wants supply to continue while they sell the business, get written confirmation of who is paying and when.
Gather your paper trail. You’ll need:
- every unpaid invoice and the customer’s statement of account;
- your signed credit application and terms of trade;
- delivery dockets, job sheets or timesheets proving you supplied;
- any personal guarantee signed by the directors;
- any PPSR registration you made against the customer;
- records of payments received in the last two years (more on why below).
Check for a personal guarantee. If the directors signed one on your credit application, the company’s liquidation doesn’t cancel it. You may be able to chase them personally, which is often a better route than the liquidation itself. A lawyer’s letter is a sensible first step.
Lodging your claim with the liquidator
Unsecured creditors claim in a set form, giving full details of the debt and identifying the documents that back it up. Most liquidators send a claim form to known creditors or post one on their website. The Insolvency and Trustee Service also publishes a standard claim form used when the Official Assignee is the liquidator.
A few things that save headaches:
- Claim the amount owing at the date of liquidation, including GST. Don’t add amounts for work done after that date unless the liquidator agreed to pay for it.
- Attach the evidence. Invoices, statements and your terms of trade. A thin claim gets queried, which slows everything down.
- Disclose any security you hold, such as a registered retention of title or a guarantee.
- Be accurate. It’s an offence to knowingly make a false or misleading claim, and an inflated claim costs you credibility with the liquidator.
- Meet the deadline. Creditors who haven’t claimed by the date the liquidator sets can miss out on a distribution.
The liquidator must send creditors a first report within 25 working days of appointment, then update them every six months. That first report is your best early indication of whether anything will come back.
Where unsecured suppliers sit in the queue
This is the part most owners find hardest to hear. In a liquidation, the money is paid out in a strict order under the Companies Act 1993:
| Who | What usually happens |
|---|---|
| Secured creditors (often the bank) | Paid from the assets their security covers |
| Liquidator’s costs | Paid before other creditors |
| Preferential creditors | Employees’ wages and holiday pay, then certain IRD debts such as GST and PAYE |
| Unsecured creditors (most suppliers) | Share whatever is left, which is often very little |
| Shareholders | Last, and usually nothing |
Put plainly, plan your cash flow as if the debt is gone. If a dividend arrives months or years later, treat it as a bonus.
Could you be ahead of the queue?
Two things can change your position, and both are worth checking before you write the money off in your head.
A registered retention of title
Many terms of trade say goods remain yours until paid for. Under the Personal Property Securities Act, that clause is generally a security interest, and it usually only protects you against a liquidator if you registered a financing statement on the Personal Property Securities Register correctly and in time. If you did, tell the liquidator straight away and ask to identify and recover your unsold stock. If you didn’t, register against every credit customer from now on. It’s quick and cheap compared with the cost of a bad debt.
Construction retention money
If you’re a subcontractor and the head contractor held back retentions under a commercial construction contract entered into from 5 October 2023, that money is held on trust for you under the Construction Contracts Act. MBIE’s retention money guidance explains how it should be held. Ask the liquidator specifically about your retentions, separately from your ordinary claim, and get a construction lawyer involved if the money can’t be found.
If the hole in your accounts is bigger than the business can absorb this month, see what funding options fit your situation while you work through the claim.
Claim back the GST you’ve already paid
Here’s money most owners can recover quickly. If you’re registered for GST on the invoice basis, you paid GST to Inland Revenue when you issued the invoice, even though the customer never paid you.
IRD’s guidance on GST credit adjustments says that once you write the debt off as bad, you can include 3/23 of the amount written off in the credit adjustments box of your GST return for that period. You don’t send supporting documents, but you must keep a record of the steps you took to recover the debt.
Two practical points:
- Actually write it off. A note in your files isn’t enough. Ask your accountant to record the write-off properly in your ledger.
- Payments-basis registrants can’t claim. If you only account for GST when you’re paid, you never paid GST on this invoice, so there’s nothing to recover.
If anything comes back from the liquidation later, you’ll pay GST on that recovery. Your accountant can also confirm the income tax deduction for the bad debt.
The letter nobody expects: a clawback claim
Sometimes the liquidator’s second letter is worse than the first. Under section 292 of the Companies Act, a liquidator can ask a court to set aside payments the company made in the two years before liquidation, where the company couldn’t pay its debts at the time and the payment let a creditor receive more than they would get in the liquidation.
So the customer who paid your overdue invoices just before going under might, in theory, have to be paid back. Where you had an ongoing trading relationship, payments and new supplies can be looked at together as a running account.
There’s a defence. You can keep the money if you received it in good faith, had no reasonable grounds to suspect the company was insolvent, and gave value. In 2019 the Supreme Court confirmed that supplying the goods or services in the first place counts as giving value.
If a clawback letter arrives:
- don’t ignore it, and don’t pay it straight away;
- pull together emails and notes showing what you knew about the customer’s finances at the time;
- get a lawyer’s view quickly. Many claims are negotiated down, and some are withdrawn.
Keeping your own business standing
The bad debt is a one-off. The damage it does to your cash flow can last for months, especially if the money was earmarked for GST, PAYE or your own suppliers.
Rebuild the forecast. Remove the lost receipts, then map the next three months week by week. Our guide to the 13-week cash flow forecast shows how.
Talk to your own creditors early. Suppliers and landlords respond far better to a phone call before a missed payment than an apology afterwards. Our guide on talking to creditors when your business is struggling covers what to say.
Don’t let IRD become the overdraft. It’s tempting to hold back GST or PAYE to cover the gap. That’s how one customer’s failure turns into your own arrears problem. If it’s already happened, funding to catch up on overdue GST and PAYE or an IRD instalment arrangement can stop it snowballing.
Look at specialist funding. Banks often go cautious right when you need them, because one bad debt can make your latest numbers look worse. Through our lending partners, property-secured loans run from $20,000 to $1m, with no financials needed for the initial assessment, and in some cases funding happens within 24 hours of approval. Without property, unsecured options for weaker credit may suit businesses trading six months or more, sized on turnover and bank statements.
A worked example: a Hamilton joinery firm
Example only: a made-up business drawn from situations we see often.
A joinery business in Hamilton supplies kitchens and wardrobes to a residential builder for years. The builder goes into liquidation owing three months of invoices, plus retentions held on two jobs. The joinery firm employs seven people, and the lost money was meant to cover the October GST return and the November wages.
- Week 1: The owners confirm the liquidation on the Companies Register, stop work on the builder’s remaining jobs, and lodge a claim with full invoices and delivery records. They write separately to the liquidator about the retentions held on trust.
- Week 1: Their accountant writes off the unpaid invoices, and the GST credit adjustment goes into the next return, putting a meaningful amount back in the bank.
- Week 2: A new 13-week forecast shows a shortfall over Christmas. They enquire with a specialist lender, explaining the bad debt up front.
- Weeks 3–4: A second mortgage over the owners’ home settles. GST is paid on time, wages are covered through the summer break, and the repayment plan is built around the firm’s other builders, not the failed one.
Months later, the liquidator’s report confirms unsecured creditors are unlikely to receive anything. The firm is already past it, with new terms of trade and PPSR registrations against every credit customer.
Their liquidation doesn’t have to be your story
We talk with owners every week whose business was going fine until someone else’s wasn’t. A customer’s collapse isn’t a mark against you, and we never treat it like one. We’re used to explaining a one-off bad debt to lenders, because it’s the kind of thing banks often hold against a perfectly good business.
The enquiry form takes about 60 seconds, and there’s no credit check when you first enquire. We don’t pass your details around a pile of lenders, so you won’t be fielding calls from strangers. Someone real looks at the size of the bad debt and the bills it has put at risk, then rings you to work through what’s realistic.
Please fill the form in accurately, especially the amount you’re short and what’s due when, so we can match you with the right option first time.