In the current economic situation, we are seeing a significant rise in the number of insolvent employers and a similar increase in employers claiming to be broke.
It is important to keep these two points separate, because most people do not use terms like ‘bankruptcy’ or ‘insolvency’ in a technical sense.
To a careful lawyer ‘bankruptcy’ means that an individual is the subject of a formal bankruptcy order by a court. ‘Insolvency’ has a wider definition, covering bankruptcy as well as the range of similar states that a company may find itself in, such as administration. The key point is that to be formally bankrupt or insolvent is an official legal state, usually created by a court order.
Many people, however, use these words to mean simply that they cannot pay their bills. Even more unfortunately, some people mean that they could pay their bills, but would rather not.
Fortunately, it is easy to find out what the official position is. For individuals the Insolvency Service operates the Individual Insolvency Register. For companies, you can check the Companies House online service.
Neither system can be absolutely up to date. But an insolvency will almost always be on record within a week. If an employer is claiming insolvency, but is not on the record, they should be able to produce the official documentation to demonstrate it.
When it comes to recovering money, the fact that a respondent is not insolvent does not mean funds will be available. For that matter, some or all money owed may be recoverable from an insolvent employer. But an important first step is to establish the official position.