Do you know the difference between insolvency and bankruptcy? People tend to confuse these two terms. However, they do have different meanings and different purposes. Together, insolvency and bankruptcy form part of a process.

Many repossessed properties are revoked due to either insolvency or bankruptcy. This is done by the financial institutions as a last resort, not by choice. The financial institutions are very helpful in situations like these, and will assist the person experiencing the problem to the best of their abilities.

Insolvency and bankruptcy both deal with liabilities exceeding assets, but they are different in structure.

Insolvency is a financial condition experienced when someone’s liabilities (debts) exceed their assets, or when a person can no longer meet up to their debt obligations.

Bankruptcy has to do with successful legal procedures resulting from either a person declaring himself bankrupt, or a resolution filed with the Registrar of Companies in order to be declared bankrupt.

Insolvency can lead to bankruptcy, but does not always. Insolvency can also be temporary, whereas all bankrupt debtors are considered insolvent.

This clearly indicates that bankruptcy is the advanced and final stage of insolvency.

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