Financial laws are really hard to understand for an individual who has no job or interest relation with finance companies. However, if anyone wants to take financial help from any bank or finance company, he must get information about the legal matters that he could face in case of failing to pay the debt. Liquidation, Insolvency, Bankruptcy, Foreclosure and Receivership are the names of such financial terms that show different consequences in case of being defaulter. Here is the difference between these financial legal terms.
Liquidation is the process of selling the assets of a bankrupt or defaulted company or business. The selling amount is first held by creditors and in case of any extra amount; shareholders are obliged according to preference.
Insolvency is the process in which insolvent or defaulted entity face legal action from lender. This legal action may be in the form of arrangement of making alternate payment or even liquidation of assets to pay off debt, in case of having no alternate method of paying debt.
Bankruptcy is legal procedure of wiping-off debt for a defaulted firm or entity with fresh financial agreements to pay off debt under new conditions. The petition of bankruptcy can be filed either from debtor or creditor. However, a person faces bankruptcy got chances to save its property from sale by signing some new financial agreement under new conditions as well.
Foreclosure is the strict legal action against a defaulter that becomes illegible to pay off its debt in assigned conditions. In this case, the property of debtor is sealed and announced for public auction by the creditors by proceeding legal actions.
In this case, a bankrupt firm or entity is owned by receiver that is appointed on assets of that defaulted company by creditors under strict court orders. Now the receiver has responsibility to recover the debt by either action that could be even liquidation of assets.
Liquidation vs Insolvency vs Bankruptcy vs Foreclosure vs Receivership
Liquidation is simply selling the assets of a defaulted firm but it is itself not a legal action, but the way of recovering debt from a defaulted firm who is facing any of the remaining legal actions like Insolvency, Bankruptcy, Foreclosure or Receivership. In case of insolvency, the debtor gets the chances of paying its debt in any alternate method other than liquidation of its assets unlike Foreclosure that leaves no way to recoup debt but only liquidation. Bankruptcy is less hard solution of paying debt and gives the chance to pay the debt under new agreement and can save the selling of assets of defaulted firm. However, in case of facing Receivership, the actual owner loose the right of even ownership of its assets and all the recovery matters of debt are governed by assigned receiver from court on behalf of creditor.
- What is the Difference between Green Card, Citizenship and Permanent Residency
- What is the Difference between Divorce, Litigation, Mediation and Arbitration
- What is the Difference between DUI and DWI
- What is the Difference between Separation of Powers, Division of Powers, Fusion of Powers
- What is the Difference between Maternity Leave and Parental Leave
- What is the Difference between Dea, Atf, Fbi and Cia
- What is the Difference between Prediction, Fact, Law, Theory and Hypothesis
- What is the Difference between Paralegal Public Defender Lawyer and Attorney
- What is the Difference between National Guard, Army Reserves and Active Duty