My builder has gone into liquidation. Can I get my deposit back?

Q. I hired a builder to build my extension and paid a 25% deposit.  The builder has since gone into liquidation. Can I have my money back?

A. It is worth checking the contract. It may state their arrangement to pay to protect the deposit such as an insurance policy. If that is the case, you should be able to make contact with the insurers to hopefully seek reclamation of the deposit via them. Otherwise, you can ask to have your name added to the list of creditors of the builder. This can be done by writing a letter explaining the payment made and stating you are submitting a claim for the money to the builder’s Insolvency practitioner. You should enclose a copy of the contract and/or receipt.  You may be asked to fill in a Proof of Debt form to ensure that your debt is added to the list of creditors.

Unfortunately, it is then very difficult to recover all of your payment. You can only get a sum back if the Insolvency practitioner is able to distribute some assets to the creditors. You may get a “pence in the pound” payment.  If you paid your deposit with a credit card, you may be able to claim the money back from the credit card company using Section 75 of the Consumer Credit Act 1974 as the credit card company in these circumstances has equal liability with the builder. For the reasons stated above, it would be inadvisable to make payment of the deposit by cash, debit card or cheque if you possess a credit card.