What is Insolvency?

What is insolvency?

Insolvency: \In *Sol”ven*cy\, n.; PL. Insolvencies. (Law) (a) the condition of being insolvent; the state or condition of a person who is insolvent; the condition of one who is unable to pay his debts as they fall due, or in the usual course of trade and business; as, a merchants insolvency. (B) insufficiency to discharge all debts of the owner; as, the insolvency of an Estates. © Relating to person is unable to pay their debts. The oldest record of insolvency can be found in the Bible:

“At the end of every seven years you are to cancel the debts of those who owe you money. This is how it is done. Everyone who has lent money to his neighbour is to cancel the debt: he was not trying to collect the money: the Lord himself has declared the debts cancelled.” (Deuteronomy 15 : 1-2 )

Brief History of insolvency

In ancient times, and insolvent debtor was subject to very harsh treatment. As trade and Commerce develops, steps were taken to ease the severe treatments full stop. In ancient Rome, creditors had the right to enslave the debtor as well as his family.

In 17th century, during golden days of the British Empire comma a decile who could not give genuine clarification for unsolved debt had to Bear public humiliation. In the Victorian era, and even up until the late 1950s comma it was not unusual for an individual who could not pay his or her debts to spend a period of time in debtors prison.

The original purpose of bankruptcy was a solution to insolvency, and not a method of avoiding debts. The aim was to liquidate all assets of an individuals Estates, large or small, in order to pay creditors as much of what was owed as possible full stop the creditors would accept a portion of what was owed comma as it was clearly all the debtor possessed.

The aim of bankruptcy in the literal sense remains the same, although there are now many more options open to in individuals finding themselves, all their business, insolvent or close to it.

The insolvency act 1986 / 2002

The insolvency act governs all  forms of debt and repayment thereof, the 1986 act replaced all pryor laws. There have been two principle amendments to the accents 1986, the insolvency act 1994 and the Enterprise act 2000 and two. Some of the changes have been relatively minor, some not. For example the Enterprise Act 2002 was responsible for the changes to the bankruptcy law that came into effect April 2004.

Please view the glossary for insolvency related terms and their explanations.