What is the difference between bankruptcy and insolvency?

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Frequently the terms bankruptcy and insolvency are used interchangeably.  However, they actually mean different things legally.  Insolvency is financial distress.  Bankruptcy is a legal process where someone applies for relief from debt.  So, it is possible that you are in financial distress (insolvent) but no claim has been filed or decree entered that says you are free of debt and ready to start over (bankruptcy).

You may want to have a conversation with a bankruptcy trustee in Waterloo about your insolvency and the remedies that are available to you.

The difference between bankruptcy and insolvency.

In order to file for bankruptcy, you must be insolvent.

That means you cannot pay the debts as they come due.  If bills or other financial obligations are higher than your assets and your cash flow is such that you can’t cover them, this is insolvency.

Insolvency is not necessarily just missing payments.

Also, if you have assets that can be liquidated to pay off the debts, you are not eligible for bankruptcy.  For instance, you have a house that, if sold at current market value, would allow you to take care of all your other loans and debt, you are not eligible for bankruptcy.  However, in Canada, if you owe more than $1,000 and are insolvent, you may begin bankruptcy proceedings.

In Canada, there are two ways to handle insolvency.

They are personal bankruptcy and consumer proposal.  In either event, you will need to work with a Licensed Insolvency Trustee.

If you feel you are insolvent, there are some basic questions to review:

  • Am I repeatedly behind in payments?
  • Are the debts greater than assets?
  • Are you living on credit cards?
  • Can you never catch up and get out of debt?
  • Are your debt balances growing each month?
  • Is the amount of debt insurmountable; you will never be able to repay it?

Depending on your responses, you may want to schedule an appointment with an insolvency Waterloo trustee to discuss your options.

Finding the help you need.

If you need a bankruptcy or insolvency trustee in Waterloo, Kitchener, Seaforth and the surrounding areas, contact us. We have years of experience in debt relief programs and helping people with debt management.

Dana MacRae Licensed Insolvency Trustee has been helping people manage their debt since 2000. With 10 offices across Southwestern Ontario, it’s easy to schedule an appointment. Just go to www.danatrustee.ca and book your appointment online. We offer video conferencing, or book a home consultation and have the trustee come to you (when allowed by COVID-19 protocols). Contact us today at 1.800.665.9965 or info@danatrustee.ca to learn more about our services and find the financial solution that’s right for you. 

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