Insolvency is a state in which the borrower has more debt than the amount of his own assets to balance them. An insolvent company may at the end of a process be declared bankrupt.
Bankruptcy proceedings shall be conducted under the bankruptcy or liquidation system. The guiding principle of bankruptcy law and reorganization is the principle of optimization.
It pertains to the proceedings being conducted so that creditors can be satisfied as much as possible, and if reasonable grounds for permit – the debtor’s company might be preserved.
As such the principal dictates that the disposal or the financial reorganization of a company gives the creditors the power to decide the fate of the debtor. This is by virtue of insolvency, it is now much more in the realm of the creditors to decide whether or not to rescue the company.
If so, under what conditions, particularly as to status of the insolvent debtor and others. Creditors will therefore decide whether the payment of their claims will result from full payment of the debtor’s assets, or through the continued operation and restructuring of the firm.
The declaration of insolvency of the debtor has several effects, among them is the early payment of its debts, the collection of all his property liable to attachment, either current or those acquired during the process, by tendering the performance of its universal creditors.
Insolvency proceedings (including repair) also allow the restructuring of the debt (eg by the system), and in some jurisdictions allow, under certain specific conditions of the exemption of the debtor, with the rest of the debt.
According to bankruptcy law, insolvency may be evidenced by the following tell-tale signs:
– Failure to pay outstanding obligations, no payment or bankruptcy filing by an entrepreneur.
– Practicing any of the following acts, except as part of judicial recovery plan:
the proceeds of liquidation of assets or precipitated makes use of wasteful or fraudulent means to make payments;
– tries to accomplish with the objective of delaying payments or defraud creditors, simulated business or sale of part or all of its assets to a third party, creditor or otherwise;
– transfers the property to a third party lender, without the consent of all creditors and remain without sufficient assets to solve the liabilities;
– simulates the transfer of its main establishment in order to circumvent the law or harm the creditor;
– gives additional collateral or the creditor for a debt previously contracted with goods without clearing enough to pay off liabilities;
– absence without leaving a representative with sufficient means to pay creditors, abandons or attempts to conceal property from his home, the place of its registered office or principal place;