Insolvent – What Does Insolvency Mean

To be insolvent means that you are unable to pay your debts when they fall due. When a business finds itself in this situation, it is unable to pay its bills when they are due

The rest of this article will refer to individuals who are can’t pay their bills when due.

There is a difference between being insolvent and being bankrupt

If you can’t pay your bills when they fall due then, under the above definition, you are insolvent.  If this situation persists and action is required, it is dealt with under the bankruptcy act AFSA or the Insolvency and Trustee Service is the Government body in Australia that administers the act.

People who are insolvent may apply for bankruptcy. This is often done when there is simply no way a debtor (person in debt) can repay their debts. It provides some protection to the debtor as well as creditors who want their money.

I like to think that people who are insolvent can sometimes find ways to get out of debt without declaring bankruptcy. So that means a person who is insolvent is not bankrupt.

I hope that this article has helped to explain what being insolvent means.

If you require additional information about bankruptcy, please visit our home page.