Insolvency law is complex, which is why we have put together
easy-to-understand definitions of some of the more commonly used
terms in insolvency law in order to assist you should you come
across a matter of insolvency.
Insolvency:
A state of financial distress in which a business or person
is unable to pay their debts as and when they fall due. It can lead
to insolvency proceedings, in which legal action will be taken
against the insolvent person or entity, and assets may be
liquidated to pay off outstanding debts.
Bankruptcy:
The legal process relating to the insolvency of a natural
person (not a company). This involves the appointment of a trustee
to sell and distribute assets among the creditors. The
bankrupt's unsecured debts owed at the date of bankruptcy are
usually wiped clean but there will be a permanent record of the
bankruptcy.
