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Legal Speak Made Easy: “Insolvency”, “Liquidation” or “Bankruptcy”?

Insolvency 5

Commonly confused, these terms are usually encountered in the context of debtors who are unable to pay their debts. An individual’s or trust’s estate is “sequestrated” and a “trustee” appointed to sell the insolvent estate’s assets and to distribute the proceeds according to legal principles. A similar (but not identical) process applies to corporate entities like companies, but in this case the entity is “liquidated” or “wound up”, with a “liquidator” being appointed. To complicate matters, the term “bankruptcy” is often used loosely in both of the above scenarios – but the good news is that only lawyers really need to know the difference!