What is the difference between declaring bankruptcy and insolvency?
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Bankruptcy and insolvency have two very different definitions, and unfortunately many individuals mistake one for the other.
What does bankruptcy mean?
Bankruptcy constitutes the full and final solution for your debt problems. You should choose bankruptcy as an option only after you have exhausted all other options (debt consolidation loans or going through an Individual Voluntary Arrangement). Bankruptcy highly affects your credit rating, as it will show within your records for many years. This solution implies that if you are a homeowner, you will be required to sell your property, and pay back in full your creditors. Basically, you can file for bankruptcy after you have exhausted all other options, and you cannot foresee a reasonable solution to your debt problems. On the other hand, it may be the creditor who will ask of you to undertake bankruptcy as an option.
Bankruptcy stays on your records for six years. This means, that during this time it is unlikely that you will be able to contract any kind of loan on reasonable terms and conditions. If however, you are accepted for a loan application, be prepared that the overall cost of your loan will be very high. There will be a short term for your loan, and very high interest rates and late payments fees plus other extra charges. This is so, because you represent a great deal of risk for the lender, because you went through bankruptcy. It works like a stigma on your financial status, so you should handle the problem with utmost care. If you are at a loss, and don’t know how to deal with your debt problems, you can always seek advice from a professional (such as a money manager for example). A qualified professional can redirect you towards the best solution, and can offer you advice regarding how you should manage your financials.
Besides all these, your status will get advertised in the London Gazette, for everyone to see. Summing it up, bankruptcy puts you out to all kinds of imminent risks (that of losing your home, that of not being able to contract any loan for a very long period of time, etc) and this is why you need to consider this option very responsibly.
What does insolvency mean?
Insolvency is practically a state of being which shows that you the debtor simply have no means of procuring money in order to pay back your debts. When a business becomes insolvent, it means it must discontinue any kind of processes, because of financial difficulties.
Being insolvent means you do have accumulated a large amount of debt, and you cannot show proof of income because you do not have a job, so you cannot make any repayments. You also do not own any property, so you cannot sell anything in order for your creditors to recuperate their loss.
It is very important that you do not let yourself being faced with bankruptcy or insolvency, and try to undertake other alternatives which will bring you out of debt sooner. Such is a debt management plan or a debt consolidation loan you will take on in order to pay off your debts in full.
What does bankruptcy mean?
Bankruptcy constitutes the full and final solution for your debt problems. You should choose bankruptcy as an option only after you have exhausted all other options (debt consolidation loans or going through an Individual Voluntary Arrangement). Bankruptcy highly affects your credit rating, as it will show within your records for many years. This solution implies that if you are a homeowner, you will be required to sell your property, and pay back in full your creditors. Basically, you can file for bankruptcy after you have exhausted all other options, and you cannot foresee a reasonable solution to your debt problems. On the other hand, it may be the creditor who will ask of you to undertake bankruptcy as an option.
Bankruptcy stays on your records for six years. This means, that during this time it is unlikely that you will be able to contract any kind of loan on reasonable terms and conditions. If however, you are accepted for a loan application, be prepared that the overall cost of your loan will be very high. There will be a short term for your loan, and very high interest rates and late payments fees plus other extra charges. This is so, because you represent a great deal of risk for the lender, because you went through bankruptcy. It works like a stigma on your financial status, so you should handle the problem with utmost care. If you are at a loss, and don’t know how to deal with your debt problems, you can always seek advice from a professional (such as a money manager for example). A qualified professional can redirect you towards the best solution, and can offer you advice regarding how you should manage your financials.
Besides all these, your status will get advertised in the London Gazette, for everyone to see. Summing it up, bankruptcy puts you out to all kinds of imminent risks (that of losing your home, that of not being able to contract any loan for a very long period of time, etc) and this is why you need to consider this option very responsibly.
What does insolvency mean?
Insolvency is practically a state of being which shows that you the debtor simply have no means of procuring money in order to pay back your debts. When a business becomes insolvent, it means it must discontinue any kind of processes, because of financial difficulties.
Being insolvent means you do have accumulated a large amount of debt, and you cannot show proof of income because you do not have a job, so you cannot make any repayments. You also do not own any property, so you cannot sell anything in order for your creditors to recuperate their loss.
It is very important that you do not let yourself being faced with bankruptcy or insolvency, and try to undertake other alternatives which will bring you out of debt sooner. Such is a debt management plan or a debt consolidation loan you will take on in order to pay off your debts in full.