The Person Who Owes You Money Has Been Made Bankrupt — Can You Still Recover It?

You lent money to a friend, or finished a job and never got the balance, and you have been chasing for a long time. Then the other side says: "I've gone bankrupt, I can't pay." Most people deflate at this point and assume it is over — but hold on. Are they actually bankrupt? And if so, is there still a route?

This article draws on published guidance from the Official Receiver's Office (ORO) and the Community Legal Information Centre (CLIC) to explain what personal bankruptcy (governed by the Bankruptcy Ordinance, Cap. 6) means for an ordinary small creditor. One distinction first: this is about an individual being made bankrupt. If the debtor is a company being wound up, the procedure and vocabulary differ — see our guide to companies in liquidation.

The Debtor Says They're Bankrupt — Verify It First

Do not drop your claim on the strength of "I'm bankrupt". It may be true, or it may be a delay tactic, and you should decide your next step on evidence rather than on what they say.

How do I check whether a bankruptcy order has actually been made?

The ORO runs an online search service that shows whether a person has gone bankrupt or faces a bankruptcy petition. The fee is HK$80 per item, with up to 5 searches per submission. The Official Receiver must also enter bankruptcy records in a register that the public can inspect on payment of a prescribed fee.

The result decides your route. If there is no order, the debtor was just talking, and a claim you have filed or are about to file should not be abandoned — see our Small Claims Tribunal guide. If there is an order, follow the steps below. HK$80 is cheap compared with giving up a debt for nothing.

It also helps to understand what you are looking for. A bankruptcy petition is the application to the court; a bankruptcy order is the court's decision that makes the person bankrupt. A search can show that someone is bankrupt or faces a petition, and the two situations are not the same: a petition alone is not an order, so do not assume the consequences below apply until you have confirmed that an order exists. Keep the search result with your other papers, because it is the cleanest proof of why you changed course if the matter is ever questioned later.

After the Order, Can You Still Use the Small Claims Tribunal?

What happens to creditors once a bankruptcy order is made?

Per ORO's guide, after a bankruptcy order, no proceedings may be taken against the bankrupt or their assets without the court's leave, and all of the bankrupt's assets (including interests in real property) vest in the trustee, who realises them for the creditors.

The logic mirrors a company winding-up: the pot is limited, and if every creditor raced to sue and enforce, those who moved later would be treated unfairly — so everyone goes through one channel. For debts that existed before the order, you should not expect to start a new claim or push on with an existing one; the proper route is the proof of debt below. How an already-filed Tribunal claim is handled depends on the case, so ask the Tribunal registry, or see what our filing assistance service can assess.

The bankrupt is also restricted: they must stop using credit cards and bank accounts, obtaining credit of HK$100 or more without disclosing the bankruptcy is an offence, they may not act as a company director without leave of the court, and they must return to Hong Kong if the trustee requires it. These are safeguards for creditors rather than a source of payment to you, but they explain why a bankrupt's finances are closely monitored. It is also worth knowing that the trustee, not you, now decides what to do with the bankrupt's property: ORO notes that discharge does not hand vested assets back to the bankrupt, so what has passed to the trustee stays available for the creditors as a group. Your role as an ordinary small creditor is therefore not to chase assets yourself, but to make sure your claim is properly on the record so that you are counted when the trustee distributes.

How to Lodge a Proof of Debt With the Trustee

What goes in a proof of debt, and what does it cost?

According to ORO, a creditor must complete a proof of debt form with supporting documents and pay a fee of HK$35; very small claims and employees' wage or salary claims are exempt. The fee is non-refundable in all circumstances, so make sure the form is complete before you pay.

The form asks for the case number and date of the order, your contact details, the amount owed as at the date of the order with supporting documents, how and when the debt arose, and any security you hold. On timing, ORO says creditors should file soon after the order, otherwise they may lose the right to vote at creditors' meetings or receive dividends. Where the Official Receiver is trustee, unregistered creditors can file through the online e-submission system (attachments up to 25MB each; PDF, Word, Excel or image files).

On documents, loan records, transfer records and message screenshots matter as in any recovery — see our evidence preparation guide and, if there was never a written IOU, how to write an IOU that works.

On the question of whether this actually works in practice, see a case involving an unpaid loan to a friend, which shows how transfer records and chat history were used as evidence. It illustrates how evidence can be put together; the outcome of any claim depends on its own facts and evidence, and it does not mean your claim will turn out the same way.

Distribution Has a Priority Order — Where Do Ordinary Creditors Rank?

Who gets paid first after the assets are sold?

According to CLIC, the proceeds of the bankruptcy estate are applied in this order:

1. The Official Receiver's fees and charges
2. The petitioner's costs (where a creditor brought the petition)
3. The trustee's fees and charges
4. Preferential creditors, such as tax
5. Ordinary creditors, such as bank loans
6. Interest on debts, last

Employees' unpaid wages have priority up to a cap (CLIC states HK$8,000; any excess is an ordinary debt). Ordinary creditors share what remains after costs pro rata.

A private loan, unpaid invoice or dishonoured cheque normally sits in the "ordinary creditor" slot. Honestly, once costs and preferential creditors have been paid, little may be left, and ordinary creditors may recover only part of what is owed, or nothing. Go in with realistic expectations: the same ORO guidance that sets out the proof-of-debt process does not promise any particular percentage, and neither will we. Even so, filing costs HK$35 (very small claims may be exempt), and a small dividend beats not having claimed at all.

A Guarantor or Co-Borrower Means the Debt May Not Disappear

A bankruptcy order concerns the person it is made against. CLIC notes that a bankrupt's family members are not liable for the bankrupt's debts, so you cannot chase relatives simply because the borrower went bankrupt — unless they have a liability of their own.

Conversely, if someone else signed a guarantee, or co-signed the loan document, that person's liability to you depends on what the document says. We cannot judge the legal effect for you here (and we did not read the statutory text on how guarantees are treated in a bankruptcy), so go back to the document, check who signed and the scope of the obligation, and take advice if needed. The same "who actually signed" thinking appears in our guide to guarantor liability for rent. Also keep an eye on the clock — see our limitation period guide.

To see which recovery routes exist for a loan beyond bankruptcy, have a look at our loan recovery use case.

When Is the Bankrupt Discharged, and Can You Still Recover After That?

A first-time bankrupt is generally automatically discharged 4 years after the order (5 years for a previous bankrupt). If the trustee or a creditor objects and the court accepts it, the period can be extended — ORO's FAQ says to a total of 8 years. A creditor can object under section 30A(4) of the Bankruptcy Ordinance, for example where the bankrupt has not cooperated or has not provided annual statements of income and assets.

After discharge, most provable debts are released, but debts incurred by fraud, fines for offences and compensation for personal injury survive. In practical terms, once the bankrupt is discharged, recovering an ordinary loan or invoice becomes very unlikely. That is why filing the proof of debt early matters: the bankruptcy period is your window to receive anything.