When cash flow is tight, business credit card debt can build up quickly. Recent data from the British Business Bank shows that use of external finance by small businesses rose from 41% to 50% in 2023, with credit card use rising from 12% to 20% as more firms turned to cards and overdrafts to manage pressure on working capital. One UK survey also found that around one in five small businesses now use credit cards specifically to manage cash flow.
If your company can no longer pay its debts and liquidation is on the horizon, the card balance can feel like the most immediate worry. Anderson Brookes is here to explain what happens to business credit card debt in a Creditors’ Voluntary Liquidation (CVL), when you might be personally liable, how disputed transactions are dealt with, and why it is so important to stop using the cards once insolvency is likely.
How Business Credit Card Debt Affects a Limited Company
Business vs Personal Credit Card Debt
Business credit card debt is money owed on a card issued to the company. The account is in the company’s name and is used for trade costs such as stock, fuel, travel and online services.
In a limited company, the starting point is that the company is a separate legal person. Its debts, including business credit card debt, belong to the company. That is different from someone who trades in their own name. A sole trader, or partner in a traditional partnership, is personally liable for all trading debts, including card balances.
In practice, many business credit cards are approved only if a director signs a personal guarantee. A personal guarantee is a written promise that if the company cannot pay, you will pay personally. Personal guarantees have become more common for smaller and newer businesses that lack a long track record or strong security.
So business credit card debt often has two layers:
- The company’s legal liability to the card provider.
- Any personal liability under a guarantee if the company cannot pay.
Understanding which applies is one of the first things Anderson Brookes will help you clarify.
How Business Credit Card Debt Builds Up
Most directors take out cards for convenience rather than as long term borrowing. Common uses include:
- Smoothing cash flow between customer payments.
- Covering everyday costs such as fuel, travel and subscriptions.
- Funding one-off equipment or stock purchases.
As margins tighten, balances can grow and interest costs rise. Some directors also use personal cards for business costs, especially in the early stages of a company. Merchant Savvy reports that around 30% of small business owners have used personal savings, credit cards or personal loans for cash flow.
Business credit card debt is usually only part of the picture. There may also be supplier arrears, tax debts and loans. Looking at all your business debt
together makes it easier to see whether the company can realistically recover or whether a formal process is needed.
Sectors We Support
We support company directors in every sector, from construction firms and logistics companies to pubs, cafés, restaurants, hotels, retailers and manufacturers. Our advice is always clear, confidential and shaped by real experience in your industry. Whether you’re dealing with unpaid tax, supplier pressure or falling income, our team understands the challenges and will guide you through the best next steps.
Where Business Credit Card Debt Sits in a CVL
The Order of Creditors in a CVL
In a Creditors’ Voluntary Liquidation, a licensed insolvency practitioner acts as liquidator. Their job is to realise the company’s assets and share the money out in a strict legal order. This is laid down in insolvency law and applies to all creditors, including business credit card providers.
In simple terms, the order usually looks like this:
1. Secured creditors with fixed charges
Lenders with a fixed charge over specific assets, such as a mortgage over a property or a fixed charge over key equipment, are paid from the proceeds of those assets first.
2. Preferential creditors
Certain employee claims, such as some wage and holiday pay arrears, have preferential status in the order of payment.
3. The prescribed part for unsecured creditors
A ring-fenced pot created out of some floating charge realisations is set aside for unsecured creditors.
4. Floating charge creditors
Lenders with security over general assets, such as stock and non-specific assets, are paid from what is left after the prescribed part is set aside.
5. Unsecured creditors
This category includes most trade creditors, HMRC, and, in many cases, business credit card providers.
6. Shareholders
Any remaining surplus, which is rare in an insolvent liquidation, is paid to shareholders.
Business credit card lenders usually rank as unsecured creditors, unless the card is linked to some specific security or guarantee that gives them a different position. That means they are paid after fixed and floating charge holders and preferential creditors, and they share what is left in proportion to their debts alongside other unsecured creditors.
How Much of the Card Debt Is Likely to Be Paid?
In many insolvent liquidations there are not enough realisable assets to pay unsecured creditors in full. Often there is only a modest dividend to unsecured creditors. In some cases there is no money for them at all once the higher ranking creditors have been paid.
For a business credit card provider, that means the company’s card balance will usually be claimed in full, but only a percentage, if any, is likely to be recovered through the CVL. The exact outcome depends on:
- The value of the company’s assets.
- The level of secured and preferential claims.
- The total amount owed to unsecured creditors.
The liquidator’s role is to treat all unsecured creditors fairly and to follow the statutory order. One unsecured creditor, such as a card provider, cannot be favoured over another.
What This Means for Directors
If there is no personal guarantee and the card is in the company’s name, the lender usually has to claim in the liquidation and cannot chase you personally.
If there is a personal guarantee, the position is different. The lender can pursue you for any shortfall after the liquidation. That might mean negotiation, court action or, in some cases, separate personal debt solutions.
The liquidator must also review transactions and director conduct in the period leading up to insolvency. If there are serious issues, they report these to the Insolvency Service, which can consider further action. Anderson Brookes will explain how this review works and the impact on directors in plain English so you know what to expect.
If you’re struggling with business credit card debt, Anderson Brookes can help. Get in touch today via our contact form or by calling us on 0800 1804 935.
Personal Liability: When Business Credit Card Debt Can Follow You
Personal Guarantees
With a personal guarantee, you are promising that you will repay the business credit card debt if the company cannot. If the company enters a CVL and there is a shortfall, the lender can still pursue you personally. That might lead to:
- Direct negotiation.
- A county court claim and possible enforcement such as charging orders.
- Looking at personal insolvency options if the sum is unmanageable.
Anderson Brookes will review your card agreements and any guarantee documents, explain what they mean, and help you plan for what could happen after the CVL.
Using Personal Cards for Business Spending
If you have used a personal credit card for company costs, the card provider is not a creditor in the liquidation. The debt is yours, even if all or most of the spending was for the business.
Sometimes, limited repayments from the company are possible before liquidation, but where insolvency has taken hold this is often unrealistic. In practice, you may need a separate plan for your personal finances, especially if there are several cards involved. We can help you see the combined effect of your business and personal positions so you can make informed decisions.
Why You Should Stop Using Business Credit Cards Once Insolvency Is Likely
Once a company is insolvent, or very close to it, your duties as a director shift. Instead of focusing on shareholders, you must put creditors first. Official guidance explains that when a company cannot pay its debts, decisions should be taken with creditors firmly in mind.
If there is no realistic prospect of avoiding insolvent liquidation, taking on more business credit card debt can be risky. New spending increases losses to creditors when you already know the company is in serious trouble. A liquidator will look closely at this period and may question why further debt was taken on.
Stopping card use at this stage is usually the safest path. It shows you recognised the problem and took steps to protect creditors.
Practical Steps to Take Now
If you think the company may be insolvent, it helps to move calmly and quickly:
- Stop using all business credit cards.
- Avoid using personal cards for company costs.
- Make a list of all card accounts, balances, limits and interest rates.
- Keep recent statements, agreements and letters in one place.
- Note any personal guarantees you know you signed.
These steps give Anderson Brookes a clear starting point. They also make it easier for a liquidator to understand what happened and why.
Disputed Business Credit Card Transactions When a Company Is Closing
Disputes on business credit cards are common, especially when a company is under pressure. Typical issues include unauthorised spending, goods or services not supplied, faulty items and subscription payments that should have been cancelled.
Raising Disputes Before Liquidation
If the company is still trading, you should follow the normal dispute process set by the card provider:
- Tell them about the problem as soon as you notice it.
- Give the date, amount and supplier details.
- Provide copies of invoices, contracts, emails or delivery notes.
Card issuers usually have strict time limits for disputes, often linked to card scheme rules, so early action matters.
If liquidation is now likely, keep a simple record of any disputes you raise and any responses from the provider. That record will help Anderson Brookes and the liquidator later.
What Happens Once Liquidation Starts
Once a CVL is approved, the liquidator becomes the company’s authorised representative and deals directly with the card provider. The account is usually frozen and the provider submits a claim in the liquidation for the balance outstanding.
If a dispute is resolved in the company’s favour, the provider may reduce its claim. That lowers the final amount of business credit card debt in the CVL. The key point is that possible disputes are not lost. If you tell us about concerns early, we can make sure they are properly passed on and considered.
Other Options for Dealing With Business Credit Card Debt Before a CVL
Not every company with serious business credit card debt needs to move straight into liquidation. The right answer depends on whether the underlying business can be saved.
Negotiation with card providers
If the business is viable but under short term pressure, some lenders may agree:
- Temporary interest reductions or freezes.
- Structured repayment plans over a longer period.
- Short breathing space while advice is taken.
These agreements are informal and do not usually deal with other serious debts such as tax arrears. They can help where card debt is the main problem, but they are rarely the whole solution.
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Business debt consolidation
Some directors consider business debt consolidation
to bring several card balances and loans into one facility. This can reduce monthly payments if the company has enough headroom.
However, consolidation can be risky where:
- The company is already insolvent.
- New borrowing is secured on key assets or your home.
- The total business debt and other liabilities are simply too high.
Consolidation does not remove the debt. It only reshapes it. Anderson Brookes will help you decide whether it forms part of a realistic rescue plan or would simply delay a problem.
Wider restructuring and formal insolvency options
Where card balances sit alongside other serious liabilities, a broader plan is often needed. Depending on the situation, this might include:
- Time to Pay arrangements with HMRC.
- Negotiated settlements with key suppliers.
- Company Voluntary Arrangements in suitable cases.
- Moving into business insolvency and liquidation where rescue is not realistic.
Legal action narrows your options. Court claims for unpaid card debt or other liabilities can quickly turn into CCJs, which harm credit ratings and can lead to enforcement such as bailiffs or charging orders.
The earlier you contact Anderson Brookes, the more control you usually have over the outcome. Call us now on 0800 1804 935 or get in touch online.
How Anderson Brookes Can Help
Facing business credit card debt and the possible closure of a company is emotionally and financially difficult. Anderson Brookes is here to guide you through the process with calm, regulated advice.
Clear review of your position
We start by reviewing:
- Business credit card debt.
- Other company borrowing and arrears.
- Any personal exposure from guarantees or personal cards.
We then explain, in straightforward language, what a CVL would mean for you and your creditors, and how business credit card debt would be treated.
Support through a CVL
If a CVL is the right step, we will:
- Confirm whether the company is insolvent.
- Help you stop trading and stop using cards in an orderly way.
- Prepare the necessary reports and statements.
- Deal with card providers and other creditors on your behalf once appointed as liquidator.
Many directors feel significant relief when contact from creditors is redirected to us rather than coming to them personally.
Balancing business and personal outcomes
Because card debt often affects both the company and the individual, we take time to explore both sides. That can include looking at your personal finances in outline, explaining how guarantees may be enforced and helping you consider separate personal debt advice where this is needed.
The aim is to remove surprises, reduce stress and give you a realistic plan for the future.
Frequently Asked Questions
What happens to business credit card debt in liquidation?
In a CVL, business credit card debt is usually treated as an unsecured claim in the company’s name. The card provider claims for the full balance. After assets are realised and higher priority creditors are paid, unsecured creditors, including the card provider, share what is left in proportion to what they are owed. Any unpaid balance is written off at company level when the liquidation finishes.
Will I be personally liable for business credit card debt in a CVL?
You are not automatically personally liable just because you are a director. If the card is in the company’s name and there is no personal guarantee, the lender normally has to claim in the liquidation. You can be personally liable if you have signed a guarantee or if you used a personal credit card for company costs.
Should I keep paying business credit card bills if the company is insolvent?
If you think the company is insolvent, it is important to get advice before making further payments. Continuing to pay one creditor while leaving others unpaid can sometimes be challenged later. Anderson Brookes can help you decide how to deal with upcoming card payments as part of a wider plan.
Need Help with Business Credit Card Debt?
If any of this sounds familiar, you do not have to face it alone. Anderson Brookes can review your situation confidentially, explain your options around business credit card debt and liquidation, and support you in choosing a way forward that is fair, realistic and manageable.
Get in touch with us now for advice. Our consultations are free, with no obligation. We can help you to take the next step with confidence.