When you hear the words insolvency and bankruptcy, it might be easy to think that they are the same thing. The reality is that there are some key differences between these two words. Understanding the difference between these two debt solutions can make a difference when you’re trying to move forward with a difficult financial decision. Principle Insolvency is here to talk a little more in depth about what these two words mean.
What is Personal Bankruptcy & How Does it Work?
If someone has high interest credit cards our personal loans that they are no longer able to repay, they may look into the bankruptcy process. These situations are common when individuals purchase things that they can’t afford. Sometimes, purchasing with the intent to pay for the item later, doesn’t always work out. Some people might take on the attitude that it doesn’t matter if they can’t pay back a debt or not because they will simply file for bankruptcy, but this is a horrible idea. Bankruptcy is a legal process in which a person declares that they can no longer pay back debts and creditors. When you file for bankruptcy, it can have lasting implications on your finances. Many people are still experiencing a difficult time getting financing for things like vehicles, homes and other living expenses as long as ten years after declaring bankruptcy.
What is the Meaning of Personal & Business Insolvency?
Personal insolvency is simply defined as when you are unable to pay your debts as and when they fall due. The most well-known form of personal insolvency is bankruptcy, but this is usually not the best option for those needing help, or indeed for creditors seeking payment. It should be noted that a business or company is not able to declare bankruptcy. When a company isn’t able to pay their debts and the liabilities equal more than the assets the company has, it is known as business insolvency. This can often lead companies to attempt to trade their services or merchandise to help pay down their debts. However, this isn’t always the best option. When a company is facing insolvency, it is advised to turn to professionals to help sort things out. When you’re working with a licensed insolvency practitioner, there are a few different directions things can go:
– Voluntary insolvency or liquidation by a third party
– Liquidator takes stock of company and decides if it makes sense to continue trading
– After analysis, the liquidator determines trading is no longer a good idea
– A secured lender or supplier is appointed to take over the company’s financial affairs
Act Sooner Rather Than Later when in Debt
If you know that you or your company is in trouble financially and can’t afford to pay back your debts, it is important that you seek the help you need before it’s too late. When you work with a professional early on, there are usually some changes that can be made to help the individual or company avoid the outcomes that have been listed above.
Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide
If you are in trouble financially, you can turn to Principle Insolvency to help you navigate some changes that need to be made to improve your financial outlook. It is our goal to help individuals find relief from debt and company’s in financial distress obtain favorable outcomes. Call us today!