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Sujai Adithya
Business Development and Banking & Financial Services Expert
Asked a question last year

What is bankruptcy and insolvency?

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Sujai Adithya
Business Development and Banking & Financial Services Expert

Insolvency is essentially the state of being that cause one to the file for bankruptcy. An organization, a family, person, or company is declared as insolvent when they are unable to pay their debits back on time. Various loans and investment is given by numerous bank, shareholders, secured creditors, etc. In this groups banks are the major creditors that holds the fixed charge on property or other business assets. Typically, a person becoming insolvent can take certain steps towards a resolution. At present there are number of laws dealing against financial falls in India. One of the most common solution for insolvency is bankruptcy.

Bankruptcy is a legal declaration of person who is unable to pay off debits. In generally, bankruptcy is of two types - Reorganization and Liquidation bankruptcy. Under the bankruptcy of reorganization, debtors should restructure their bill plans to make them more easily met. Where as under liquidation bankruptcy, debtors has to sell their assets to make money so that they can pay off their creditors. Bankruptcy is the final stage of insolvency, which results in winding up of an individual's assets. In this case, the court itself has to decide the appropriation of the individual property of the insolvent among their creditors.