If you’re struggling to manage debts, you’re likely searching for a solution. During the search, the terms insolvency and bankruptcy will probably come up. At first glance, the two might appear to mean the same thing; however, there are a few key distinctions that you should understand. The following guide clarifies these differences to help you move forward.
Insolvency refers to a temporary inability to repay creditors or third parties for any debts owed. In other words, the total value of your current assets is less than what is owed. The common misconception is that as soon as you’re insolvent, filing for bankruptcy is the only option. However, this isn’t true. There are numerous other solutions available to help repay debts beyond filing with the courts.
For example, you might be able to sell some belongings for cash. Consider taking on a side job or additional hours at work to increase cash flow.
Another option still is to ask friends or family members to help cover expenses. Even something as simple as revisiting your monthly budget to cut spending where possible may free up some funds to repay debts.
Unlike insolvency, bankruptcy is often filed when there are no alternatives available to repay your creditors. By declaring bankruptcy, you also admit insolvency to both the courts and your lenders.
Depending on the circumstances surrounding your finances and debts, there are a few types of bankruptcy that could help. For example, if you anticipate being able to repay the debts over a period of time with more manageable installments, considering filing for Chapter 13. This option will allow you to maintain ownership over your assets. Conversely, with Chapter 7, the courts may seize nonexempt assets to repay your creditors. However, this will eliminate all debts, allowing you to start fresh.
If you need help determining if bankruptcy is the right choice for you, turn to The Law Office of J. Baron Groshon in Charlotte, NC. For almost 30 years, these knowledgeable attorneys have been servicing residents throughout Charlotte, Concord, Gastonia, and Lake Norman, providing insight, advocacy, and representation to help ensure secure finances. Visit them online or call (704) 342-2876 to schedule an initial consultation.