When you're experiencing financial-related stress, you don't want to sift through complicated legal jargon to find a solution. For example, what's the difference between insolvency and bankruptcy, and which one will help you find debt relief? To settle your confusion, review the brief guide below.

Insolvency

Whether you just received a hefty hospital bill or have acquired a lot of credit card debt, you may not be able to pay back what you owe at the rate your creditors expect. If you aren't able to make your minimum payments, you're experiencing insolvency.

Cash-flow insolvency means you're bringing in less money than you're spending, and you're therefore at a deficit to your lenders. If you own a company, you may also become balance-sheet insolvent, meaning your debts exceed your total income and assets. However, if you can find the temporary cash to pay off your debtors, balance-sheet insolvency will eventually turn into cash-flow insolvency.

Bankruptcy

When searching for a solution to your insolvency, you may consider bankruptcy. In other words, you don't have to declare bankruptcy to be insolvent, but you do have to be insolvent to declare bankruptcy. When you've accepted that you aren't able to pay back what you owe, filing for Chapter 7 bankruptcy allows you to wipe your financial slate clean and start over. In this case, whatever assets you have are liquidated to pay your debts.

If you do have some money to pay back your debts, you might qualify for Chapter 13 bankruptcy. In this debt relief situation, the government will establish a payment plan they deem reasonable, so you can retain your property and pay back your debts over three to five years. If your business needs to declare bankruptcy, you can also opt for Chapter 11. This option calls for the reorganization of your debts and assets, as well as potential modifications to your business, to reverse your insolvency.

If you’re insolvent and ready for a debt relief solution, turn to Brian R. Cahn & Associates, LLC in Cartersville, GA. Their team will help you choose the best form of bankruptcy for your needs, so you can work toward a brighter financial future. With over two decades of experience, you can count on them to provide attentive, personalized service. Visit their website to learn more about their offerings, or call (770) 382-8900 to schedule a consultation.