Insolvency is defined by the Corporations Act as an inability to pay debts, as they fall due, out of the debtor’s company resources and refers specifically to businesses and companies. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.
Know the Difference
Often insolvency practitioners are appointed by the courts to oversee affairs of troubled corporations to either:
• Have them trade out of their difficulties; or
• To wind them up.
Variations of insolvency, include, but are not limited to, the following:
• Voluntary administration
• Insolvent trading
• Directors liability
• Schemes of Arrangements
Bankruptcy refers to the situation where an individual is unable to meet their financial obligations and repay accrued debt. It occurs when an individual does not have enough money/assets to pay creditors or debt that is owed. However, it is not to be confused with the American term in which ‘bankruptcy’ is used for companies and not individuals.
If you find that you are unable to repay your debts, you cannot just say that you are bankrupt. You must go through a formal process and be deemed eligible, and hence legally declare it; that is if the bankruptcy is voluntary.
Generally, bankruptcy lasts for a period of three years but can be extended in certain circumstances. There is a permanent record of your bankruptcy on the National Personal Insolvency Index (an electronic public register which can be accessed by anyone for a fee).
Before you contemplate either Bankruptcy or Insolvency, see us, as there are alternatives – we can help. Here at The Quinn Group, the dedicated team of lawyers and accountants at can assist you with advice and assistance for your bankruptcy and insolvency needs. Contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.