What is Insolvency?
People often get the terms bankruptcy and insolvency mixed up. Insolvency is a financial condition, whereas bankruptcy is a legal solution applied for to resolve your insolvency. Bankruptcy is a legal process that occurs when you declare that you can no longer meet your debt commitments to Credit Providers.
What is the difference between
Insolvency and Bankruptcy?
You may often hear the terms “insolvency” and “bankruptcy” being used interchangeably, but they have different meanings.
What is Insolvency?
Though both terms deal with excessive debt, insolvency is a financial state that can lead to declaring bankruptcy.
Although applying for bankruptcy or sequestration is a possible resolution for insolvency, this type of situation does not automatically lead to bankruptcy. Depending on your circumstances, you may be able to address your insolvency by other means, such as extending your home loan through Bond Consolidation, obtaining a Debt Consolidation loan or applying for Debt Review.
What is Bankruptcy?
Bankruptcy is a legal process that provides you with protection when you are unable to pay back your debt. When you apply for bankruptcy or sequestration, a Licensed Insolvency Attorney will be employed to deal with your debt and Credit Providers.
Once all legal processes are finalised, you will be rehabilitated and become solvent again within 24-48 months. Rehabilitation is also a legal process which is obtained after Bankruptcy or sequestration, putting you back into a solvent credit worthy state again.
