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What is the Difference Between Insolvency and Bankruptcy?

June 13, 2022

3 Minute Read

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Did you know that insolvency and bankruptcy have different meanings? Even though these two terms are closely related and often used interchangeably, they are very distinct! Read on to learn the difference between insolvency and bankruptcy.


On one hand, insolvency is a financial state where an individual is unable to make his/her debt payments on time. When a person is insolvent, the amount of their debt is greater than the total value of their assets. On the other hand, bankruptcy is a legal process to help achieve debt relief when experiencing insolvency. Filing bankruptcy offers many benefits including protection from creditors and a fresh financial start after discharge.

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