Insolvency is a state of financial distress where a person or business is unable to pay debts when they are due.
Insolvency often leads to insolvency proceedings, where legal action may be taken against the insolvent person or company. This may result in assets being liquidated to pay off debts.
When does insolvency lead to bankruptcy?
Insolvency can eventually lead to bankruptcy if the insolvent party is unable to clear its debts or come to an agreement with the parties the owe money to.
Bankruptcy should be avoided at all costs because in most cases, it results in depletion of your assets. By having a solid plan to bring yourself or your business out of insolvency, bankruptcy can usually be avoided.
Preventing the damages caused by insolvency:
Insolvency can cause damages to your business’s operations, value and reputation. For this reason, it is important that you take action as soon as possible.
There are several methods a person or business can take to pay off debt quickly. These include:
- Selling assets and contributing the money towards debt.
- Increasing operations to create more profit.
- Working with creditors to reach an arrangement that reduces financial stress.
The best thing you can do to reduce the damages of insolvency is to get advice from a professional. We can give you advice relating to your financial difficulties and help you through the insolvency process. This will save you a lot of money and help you to reduce debt effectively.