If your customer's company is in liquidation, you're almost certainly an unsecured creditor. Unsecured creditors usually recover cents in the dollar, sometimes nothing at all. Acting in the first week still matters, because your position on proof of debt, security interests, personal guarantees and unfair preference exposure is being set right now.

This page is written for the B2B supplier or subcontractor who's just opened a letter from a liquidator, is owed a five or six figure amount, and wants to know whether to chase it or write it off. It's general information and not legal advice. If the numbers are significant, get advice on your specific file.

Often yes, for full recovery. The honest number is that unsecured dividends are usually a fraction of the invoice, and sometimes nothing survives once secured creditors and employee entitlements are paid.

External administration is the umbrella term for what happens when a company can no longer pay its debts. It covers voluntary administration, creditors voluntary liquidation, court liquidation and small business restructuring. Once any of those starts, your invoice stops being a normal receivable and becomes a claim in a formal process.

ASIC's Insolvency Statistics for FY2025-26 recorded 14,152 companies entering external administration or having a controller appointed for the first time. That's the pool of files that produced letters like the one on your desk.

The outcome data is sobering. ASIC's Report 836 reviewed 3,528 voluntary administration appointments and found that 44% ended in a deed of company arrangement, 50% went into voluntary liquidation and 6% into court liquidation. Even in the better outcome bucket, wholly effectuated DOCAs paid an average dividend of 21 cents in the dollar to unsecured creditors, with a median of 11.5 cents.

What you do in the first week can still affect the outcome. Check the proof of debt deadline, confirm whether you hold a registered security interest and review the original credit application for any personal guarantee. Each may affect the recovery options still available to you.

Work through this list in order. Each step protects a position you can lose by waiting.

1. Read the liquidator's notice properly. Note the proof of debt deadline. Under ASIC Information Sheet 45, the liquidator must give at least 14 days' notice of that deadline before paying a dividend. Diarise it.

2. Lodge the proof of debt form. Attach every invoice, statement, contract, purchase order and delivery record you have. If the liquidator rejects any part of your claim, they must notify you within 7 days of that decision and give reasons.

3. Search the PPSR. Check whether you or anyone else holds a registered security interest against the debtor. If you have one, tell the liquidator in writing straight away.

4. Pull the credit application. Look for a personal guarantee or director guarantee. If it's there and properly signed, that's a separate recovery path.

5. Preserve everything. Emails, delivery dockets, signed job sheets, texts about payment promises. If a dispute arises later about quantum or delivery, this is your evidence.

6. Stop supplying on credit. Sounds obvious. Under pressure, some suppliers keep going in the hope of preserving the relationship. That just grows the unsecured claim.

If this file is your first insolvency, it can help to read how the debt recovery process usually runs before insolvency so you can see where things went off track.

A creditor has more recovery options before formal external administration begins.

If the company hasn't yet been placed into administration or liquidation, and is simply refusing or failing to pay, you have a lever that disappears the moment an administrator is appointed. It's called a statutory demand.

Under section 459E of the Corporations Act 2001, a statutory demand can be issued for any undisputed debt of $4,000 or more. The company has 21 days from service to pay, provide security, or reach a compromise. If it doesn't, the company is presumed insolvent, and you can apply to wind it up.

In practice, a statutory demand creates immediate pressure because the company has 21 days to resolve it before a winding-up application becomes available. It can also establish sooner whether formal insolvency is likely, rather than leaving the creditor to spend several more months pursuing ordinary reminders.

A statutory demand is only available before a voluntary administrator is appointed. After the appointment, the debt must be dealt with through the administration, so delaying action can materially change the recovery options available.

Where a statutory demand or winding-up application may be appropriate, eCollect can refer the matter to eCollect’s associated legal firm, E C Legal. The established systems and processes between eCollect and E C Legal allow matter information and supporting data to be transferred in a format the solicitors can quickly understand and assess. eCollect staff are also trained in preparing matters for legal review. This generally makes the cost of engaging E C Legal significantly lower than engaging an unrelated external law firm. However, the referral, legal opinion, initial assessment and any subsequent legal action should not be assumed to be free. If the company is still trading, you can request a free eCollect debt appraisal to explore the available recovery options before an administrator is appointed. The appraisal does not include legal advice from E C Legal.

This is the letter creditors don't expect. You were paid months ago, the company has since collapsed, and now a liquidator is asking for the money back. It's called an unfair preference claim, and it's set out in sections 588FA and 588FE of the Corporations Act.

In plain English, an unfair preference happens when an unsecured creditor receives more from a company than they would have received if the payment hadn't been made and they'd proved for the debt in the winding up instead. The liquidator's job is to level the playing field between unsecured creditors. Clawing back preferential payments is one of the tools.

The look-back windows are:

• 6 months before the relation-back day for standard insolvent transactions with an unrelated creditor.

• 4 years for insolvent transactions with a related entity (for example a director or associated company).

• 10 years for transactions entered into with a creditor-defeating purpose.

If you receive a letter from a liquidator asking you to repay funds, don't ignore it and don't pay it straight away. There are defences worth exploring. The main one is the good-faith running-account defence, which can apply where you continued to supply on ordinary trading terms without suspecting insolvency. Talk to a lawyer about the facts of your file before you respond.

The ASIC FY2025-26 data is unambiguous about where these letters are landing. Construction saw 3,472 companies enter external administration or have a controller appointed, the worst-hit sector by a wide margin. Accommodation and food services was second with 2,078.

The construction pattern is structural. Subcontractors sit at the end of a payment chain that runs head contractor, subcontractor, sub-subcontractor. When the builder above you collapses, retentions and progress claims evaporate, and the invoices you were counting on to pay your own suppliers become unsecured claims. We see this pattern constantly in construction recovery work and, on the other end of the exposure scale, in hospitality, where thin margins and seasonal cash flow leave little room when a group operator hits the wall.

A common scenario. A formwork subcontractor is owed $85,000 across three progress claims when the head contractor goes into voluntary administration. No PPSR registration, because the work was labour and services, not goods. No director guarantee taken at credit application. The subcontractor lodges a proof of debt and receives a dividend of eight cents in the dollar eighteen months later. By then, the subcontractor’s remaining option was to lodge the claim and wait for the administration to run its course.

By the time a liquidator’s letter arrives, much of the recoverable value has usually already been lost. The warning signs generally appeared earlier in the accounts receivable ledger.

A clean credit file can coexist with worsening payment behaviour. Customers who routinely pay 30 or 45 days late, or whose payment timing has slipped over two or three billing cycles, warrant closer attention. A simple payment behaviour index across the ledger can identify that deterioration before formal insolvency begins.

The second signal is liquidity, not profit. A business can intend to pay you and still default because their own customers haven't paid them. Their receivables aging and cash conversion cycle predict collection success better than a static balance sheet. If a debtor is stringing you along while their own book blows out, they're usually not far from the wall.

Credit controls put in place before trouble starts will usually matter more than repeated reminders after an account has deteriorated. Register any relevant security interest when the contract is signed and consider whether a personal guarantee is appropriate during the credit application. Once the account reaches 60 days overdue, a letter of demand may be more useful than continuing informal follow-up.

DIY works fine on straightforward late payers. It stops working when the file has multiple guarantees, cross-border elements, a disputed amount, or a debtor sliding toward insolvency. At that point, file-level triage and an efficient pathway to legal review may be more valuable than continuing with ordinary payment reminders.

eCollect has been operating under the same ABN since 2002, has recovered over $120 million for more than 10,000 clients, is ISO 9001 certified and is an AFCA member. Where legal review or action is required, eCollect can refer the matter to eCollect’s associated legal firm, E C Legal. Their established systems and processes allow matter information and supporting data to be transferred efficiently, while eCollect staff are trained in preparing matters for legal review. As a result, the cost of engaging E C Legal will generally be significantly lower than engaging an unrelated external law firm, although legal advice, assessment and action are not necessarily free. Our corporate debt collection page explains the broader recovery process for B2B portfolios.

Before you write off a five or six figure amount, it's worth knowing where you actually stand. Our free eCollect debt appraisal can provide a preliminary view of the available recovery options and whether the matter may require legal review. The appraisal is provided without obligation, but it does not include legal advice or mean that any referral, opinion or assessment from E C Legal will be free. This is general information, not legal advice, so if the file is complex, we'll say so and tell you what type of advice to get.

• ASIC Insolvency Statistics Series 1 and 2, published 24 August 2026

• Corporations Regulations 2001 (as at 21 April 2026)

• ASIC Information Sheet 45: Liquidation, a guide for creditors

• Corporations Act 2001 (as at 1 July 2026)

• ASIC media release 26-144MR: Review of voluntary administration and DOCA outcomes