Insolvency
Insolvency is a situation where a person or a company can no longer pay its debts. This can have major consequences for everyone involved. Below you can read what insolvency is, what an insolvency lawyer does, what it means for businesses and what procedures are available.
What is insolvency?
Insolvency means that a person or company can no longer pay its debts. This can happen for many reasons, such as poor financial planning, economic problems or unexpected events.
There are two types of insolvency:
- Balance sheet insolvency: In this situation, total debts exceed total assets.
- Liquidity insolvency: In this situation, there is not enough money to pay the bills on time, even though the total assets are worth more than the debts.
Insolvency can have major consequences, both if you have debts and if you are still expecting money from a person/company in debt, and often requires a legal solution.
Insolvency lawyer
A lawyer can help you with legal issues surrounding insolvency. This lawyer helps both people and companies in financial trouble and creditors to reach a fair solution. The duties of a lawyer include:
- Analysing the financial situation and advising on the best steps.
- Assisting in insolvency proceedings such as bankruptcy or debt mediation.
- Negotiate to reach a solution.
- Representing in court.
- Drafting plans to restructure and continue a business.
A lawyer will help you find the best outcome in difficult financial situations.
Insolvency of companies
When a company becomes insolvent, it has major consequences for its owner(s), employees and creditors. There are several ways to deal with a company's insolvency:
- Bankruptcy: The company's assets are sold to pay its debts. The company ceases to exist.
- Judicial reorganisation: The company is restructured and debts are rescheduled so that the company can continue to exist.
- Amicable settlement: An agreement between the company and creditors without court intervention.
- Relaunch: The viable parts of the business are sold to a new owner, who continues operations.
It is important to seek legal advice to find the best solution for a company in financial trouble.
Insolvency proceedings
There are different legal procedures to deal with insolvency:
- Bankruptcy: A person or company is officially declared insolvent by the court. Its assets are sold and distributed to creditors.
- Judicial reorganisation: The aim is to save the company by approving a plan controlled by the court. This may involve renegotiating debts, downsizing the company or attracting new investors.
- Collective debt settlement: a procedure for individuals with serious debts, where a mediator is appointed to draw up and manage a repayment plan.
Each procedure has its own rules and consequences. It is important to get expert legal advice to go through the process properly.
In insolvency, it is important to act quickly. A lawyer can help to take the right steps and achieve the best outcome for everyone involved.
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