What Is Insolvency?

Insolvency In Ireland - What Is InsolvencyBy definition, insolvency is the inability to pay a debt when it is due, and most businesses fear the idea of becoming insolvent Running a business isn’t all about earning money and spending the profits; it’s also about being able to pay back the people and institutions that helped start your business, and of course to pay your creditors in a timely manner.

Insolvency falls under two categories. The first one is cash flow insolvency, which happens when a business cannot pay its debts on time. The second category is balance sheet insolvency, and this happens when the business has greater amounts of liabilities than assets.

Filing for a bankruptcy is one possible answer when your business is insolvent, though it is by no means the best solution. When a person is served a bankruptcy order, that person will lose valuable assets such as properties, vehicles and stocks. While a bankruptcy order could mean the loss of your house, a minimum delay of a year may be granted.