What is the difference between insolvency, bankruptcy and liquidation?
Jan Meriss Alfonso Assistant at Ascent Law LLC Liquidation is an option for companies that are experiencing financial trouble. Unlike bankruptcy, liquidating a business will not affect the personal finances of its directors or shareholders. However, declaring personal bankruptcy will prevent you from serving as a director of a company. Insolvency bankruptcy Insolvency is a situation where an individual or a company has insufficient assets to pay its debts. The result of untreated insolvency is bankruptcy or liquidation. These processes are different for individual debtors and corporate entities. Individual debtors face the risk of bankruptcy when their income is not enough to cover their liabilities. Moreover, if the company is insolvent, it is not possible to pay off its debts unless it sells its assets at a reasonable price. A bankruptcy can be declared either voluntary or compulsory. Companies often choose a voluntary arrangement with their creditors. These arrangements usuall...