Insolvency is a term used for when an individual or Company can no longer meet their financial obligations to Creditors. Insolvency can arise from poor cash management, a reduction in cash inflow, or an increase in expenses. Before an Insolvent Company or Individual gets involved in insolvency proceedings, they will likely be involved in informal arrangements with Creditors, such as setting up alternative payment arrangements or seeking a Debt Counsellor / Business Rescue Practitioner for third party assistance.
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When an individual or Company can no longer meet their financial obligations to Creditors. Insolvency can arise from poor cash management, a reduction in cash inflow, or an increase in expenses.
Cash Flow insolvency occurs when a debtor cannot make a payment due to lack of money. Balance sheet insolvency is when your debt exceeds your unencumbered assets.
Bankruptcy is permanent legal procedure resolving insolvency, whereas insolvency is temporary in nature. Insolvency is involuntary whereas bankruptcy can either be voluntary or involuntary.