Downtown Honolulu, Hawaii
841 Bishop Suite 2221
Honolulu, HI 96813
(808) 524-4529

What Is the Difference Between Insolvency & Bankruptcy? January 15, 2020

Downtown Honolulu, Honolulu
What Is the Difference Between Insolvency & Bankruptcy?, Honolulu, Hawaii

In everyday conversation, the words “insolvency” and “bankruptcy” are often used interchangeably to mean a person or company can’t meet their financial obligations. While the two words are closely related, one actually refers to your financial situation, while the other describes debt relief options that can help you get back on track. Understanding the difference can reduce confusion and help you decide if bankruptcy is right for you.

What Is Insolvency?

debt reliefIn common parlance, insolvency is the legal term for being broke. A person or entity is considered insolvent when they can’t meet their financial obligations or pay back lenders on time. This might occur because of a job loss, a medical emergency resulting in bills you can’t pay, or divorce.

Unfortunately, being insolvent doesn’t prevent lenders from taking steps to recover the money you owe, such as filing lawsuits, repossessing assets, and garnishing wages. In these cases, filing bankruptcy may provide an avenue for getting your feet back under you.

What Is Bankruptcy?

Bankruptcy is a debt relief tool designed to help insolvent borrowers get out from under unmanageable debt. Under a Chapter 7 bankruptcy, you can completely discharge most unsecured debt in exchange for surrendering some of your assets to the trustee.

Borrowers with sufficient income and assets may opt for a Chapter 13 bankruptcy instead, which allows you to make up past due payments on some debts and discharge others. Chapter 13 is a popular option for borrowers who do not want to lose their house or car, or those who aren’t yet completely insolvent.


If you’re facing a financial problem, let Greg Dunn, Bankruptcy and Debt Relief Attorney help blast your debts away. As one of Honolulu’s most experienced bankruptcy lawyers, he’s helped over 12,000 families throughout Hawaii regain their financial freedom. Visit his website to learn more about the benefits of bankruptcy, get more financial tips on Facebook, or call (808) 524-4529 to start exploring your debt relief options today.

Other Announcements, Events and Deals from Greg Dunn Bankruptcy and Debt Relief Attorney
How to Prioritize Your Debt Payments, Honolulu, Hawaii
From dealing with student loans to credit cards, many adults dream of finding debt relief. Yet multiple accounts can make the process even more challenging. If you fall more
Debt Settlement vs. Bankruptcy: What You Need to Know, Honolulu, Hawaii
Debt settlement and bankruptcy are both viable paths to debt relief. They can reduce and, in some cases, eliminate your debt, but each involves different processes that come with more
4 Myths About Bankruptcy, Honolulu, Hawaii
Bankruptcy is a legal process that provides individuals with debt relief. Unfortunately, misinformation often prevents people from considering it as a viable option for more
How Does Bankruptcy Impact Your Credit Score?, Honolulu, Hawaii
If you’ve accumulated debt and your financial situation has begun to feel out of control, you may be considering bankruptcy. This option will get you back on your feet and keep more
3 Strategies to Stop the Foreclosure Process, Honolulu, Hawaii
Falling behind on mortgage payments can happen to anyone and is often unavoidable due to an unexpected job loss, illness, or other financial hardships. Unfortunately, once you more