by: fair01
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Date: Tue, 1 Jun 2010 Time: 1:49 PM -
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The act of not being able to clear your debts before the due date can be generalised as Insolvency. This definition is used widely with respect to businesses. There are two types of Business insolvency namely, Cash Flow Insolvency and Balance Sheet Insolvency. The first type refers to the inability of a company or business to clear its debts while the second type refers to having excess liabilities i.e. more liabilities than assets. Personal Insolvency takes both your cash flow and assets together into consideration.
Article Source: DirectoryArticles.com
There are various reasons contributing to business insolvency. For smaller businesses, insolvency happens because of their lack of substantial assets to put up as security. While with bigger businesses, loose accounting and managerial mishaps are the leading causes of insolvency. In pure business terms when money is lost between production and sale processes it often leads to insolvency. Business Insolvency does not always happen from within a business. Outside influences such as new government policies, world financial condition, competitors and customers can also cause a business to go into insolvency.
On a personal level, filing for insolvency should be the last thing an individual tries. Only after exhausting every other alternative such as debt consolidation, debt management plans, etc. should he file for personal insolvency. Although the benefits of filing for personal insolvency are many but, so are the demerits. On the one hand while the lending institutions can no longer pester you for money, you become ineligible for loans throughout the period of insolvency. Getting personal insolvency does not save you from secure loans. You will have to continue paying those back. Similarly any alimony that you need to give will have to be continued throughout the insolvency period.
Filing for business insolvency and personal insolvency is a simple process. With the help of a lawyer specialized in Insolvency laws of the state, you can fill in the applications necessary for declaring insolvency with the appropriate authority. Having done that you will be required to show up for a court proceeding where your condition shall be judged and your state of insolvency will be decided.
Instead of filing for insolvency, consider taking active steps such as debt management and debt consolidation. The former deals with making a detailed outline of all your current debts and planning out how you are going to pay them out. The latter method involves approaching debt help companies to buy off all your debts from various lenders against collateral that you give them such as your house. Debt management involves being proactive and disciplined in your daily spending. It also involves staying away from future debts until all your current ones get cleared. For this, you require to plan which debts are urgent and which can be delayed. Depending on the priority of the debts, you will have to pay them of one by one. This is the essence of debt management. The other method involves combining all your current debts into one large debt with a collateral and lower interest. This allows you to make one payment every month and gives you more time to clear your debts. Before filling for business or personal insolvency, try out these two simple yet effective alternatives. If they fail, then you may go ahead and file for insolvency.
Whether you are facing business insolvency or personal insolvency issues, it is important to act fast, as this increases your chance of avoiding bankruptcy.
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