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What's the difference between insolvency and bankruptcy?

What does each term means and how do they apply to you or your business from a legal perspective?

Top voted answer
Aishah Mustapha

Aishah Mustapha, Content Marketer at

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Insolvency is when a person or company is unable to pay their debts, due to reasons such as cash flow, economic downturn, fraud, etc. An insolvent business does not have to cease operations. It has several options to resolve the insolvency. Meanwhile, bankruptcy is when a person, not a company, can’t pay his or her debts, and a bankruptcy proceeding needs to be taken to recover the debts.