Companies Going Bankrupt and The Impact on Us As Consumers

It appears to be something we are seeing and hearing about more and more these days, and that is companies going bust or into Administration, liquidation, bankrupt .

It appears to be something we are seeing and hearing about more and more these days, and that is companies going bust or into Administration, liquidation, bankrupt.

Companies Going Bankrupt and The Impact on Us As Consumers

There have always been business that have gone under, and there may be a few reasons why we seem to hear more about it now:

* The sheer number of companies and stores going bust

* Communication is better with the news, Internet, etc

* We are more aware of the financial status of companies

* We as consumers have a connection with the company in question

* The size of the companies in question, large well established firms going into Administration

As you can see, there are a lot of reasons why we may be noticing this more.

Just as there are many factors involved or reasons why a company may go bust:

* Too much debt

* The economy

* Poor sales

* Fickle consumers

Companies Going Bankrupt and The Impact on Us As Consumers

All we need to do is look to the High Street to see how troubling times can be for retailers, and other businesses alike.

If you look back over the past 10 years, many stores, shops and companies have disappeared from view, gone, no longer trading.

And it is not just stores and shops/retailers, look at the construction giant Carillon who went into Administration earlier this year. Then there also is the payday lender Wonga who went out of business just a few months ago.

The list of firms going bust is not limited to just stores and retail outlets, it can be any company or business.

Emoov, an online estate agent has recently gone into Administration, as has fashion designer Orla Kiely.

In Emoov’s instance, they had not too long ago merged with Tepilo who were a competitor, and also Urban.co.uk, a lettings agency. So in essence with Emoov closing its doors, it is like three (3) companies in all closing down.

Businesses Closing: No One Wins

It is an under statement and not one to jest at in saying when businesses go bust no one wins, and it is not a good thing.

Companies Going Bankrupt and The Impact on Us As Consumers

When a company closes down and ceases trading we as consumers lose that product or service. Sure there may be competitors to continue to provide the service or product, but there is now one less.

Now if the company provided a shoddy product or service, the demise of the company is along the lines of natural selection. They were not going to stay in business very long.

But there is more to it than just us selfish consumers losing out.

People lose their jobs, and are unemployed.

The government loses tax money, and in addition, has to pay out in the form of benefits to those who are eligible and now out of work.

Again, no one wins.

So how does all these companies going bankrupt affect us, affect me as an individual???

Companies Going Bankrupt and Me

We previously mentioned that when a store, shop, or large corporation goes bust, one way it affects us as individuals is that we no longer have that service or product from that company.

However, if you never traded or bought from that store or company, their going under would not have any real impact on you.

And that is basically the same way any company going out of business affects you as an individual, for the most part and I’ll explain in detail in a moment, unless you have business or are doing business, buying, trading, supplying, working for in some capacity with that company, their closing doors will not directly affect you.

Indirectly it can affect you.

In the example of the construction firm Carillon, many of their projects, such as the new Royal Hospital in Liverpool are in limbo. This indirectly, and for some directly, affect the city of Liverpool, and its residents; even if they did not work for or trade with Carillon.

So what happens to us as individuals, individual consumers if a company we buy from or trade with goes bust?

To make it simple, we become another creditor, and we are a small creditor, in a huge ocean of creditors.

Many businesses goes bust due to excessive debt, such as Carillon, Wonga, Orla Kiely, and many others. They can no longer borrow money, and they can no longer service their debts, so they are insolvent.

If you are owed a refund, or have placed an order and paid, you are in essence a creditor. However, the company may only owe you £50, or even £100, £300, they owe banks and investors thousands, and even millions of pounds.

Your claim to get your money back is way down the food chain.

Companies Going Bankrupt and The Impact on Us As Consumers

You may be holding a gift card for a shop, and it goes under. You’ll need to place a claim with the Administrators for a refund, and your claim will be smaller than most other banks or lenders the company dealt with.

If you have a loan with Wonga, you still are required to pay the loan, even though they went out of business.

Then in dealing with a claim and if you get paid, the company that has gone bust must have sufficient assets to pay, even before paying the creditors can be considered. And if a company goes bust due to excessive debt, the odds are not looking good they have any assets to payback to those they owe.

Prior to a company closing its doors and seeking out Administration, they usually look for buyers, investors to pay money into the company to keep it afloat. And this does sometimes happen.

In addition, once in Administration, those handling the Administration will look and seek out buyers for the company. In some instances a buyer may only want a part of the business, or select stores that may be profitable.

So there are some “safety nets” in place prior to liquidating a company. Unfortunately these do not always work and catch the falling company.

So unless you are dealing directly with a company that goes into Administration, either as an employee, customer, supplier, or are trading with them in some capacity, the company ceasing to trade does not affect you directly, but in some ways it affects us all.

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