What is the difference between insolvency, bankruptcy and liquidation?

There are not a lot of people who exactly know the meaning of insolvency, bankruptcy and liquidation. This is because they all think that all of three have the same meanings. Well, to some extent we can have general idea about them being the same but in actual they have a lot of differences.

All of the three terms amount actually to the same thing which is the inability to pay the debts but the people need to know the differences all of them have if there is some financial difficulty they are facing at the moment.


It is basically what your financial status is. It is the inability to pay the debts because of lack of finances for the business.

This is from where the bankruptcy or liquidation starts. It means the insolvency is the state which leads to bankruptcy or liquidation

Insolvent If there is a person who has the chance of becoming bankrupt, such a person will be referred to as insolvent.

If there is a business who has the chance of becoming bankrupt, such a person will be referred to as insolvent.

Indicators of insolvency

• Delay in payments
• Struggling while paying the suppliers
• tax debts
• tight cash

seeking professional help might help the person who is getting insolvent with time. This will actually help him get back to the track despite getting bankrupt


There are legal processes in different countries for the bankrupt people. they have to go through certain procedures in order to get saved from anything harmful.

The matter will be taken to the authorities and if the person is having anything that can be sold, it will get sold and the money will be taken to return the debts (as much as possible)
The duration of the process of bankruptcy:
3 years


Sometimes, when the game goes out of the hands of the people, they see the option of liquidation in Dubai.

In liquidation, the company winds up the business and sells its assets. All these assets get distributed among all the creditors.

Here is some type of liquidation that can be used be used by the people

• Court-ordered liquidation

If the matters are taken to the court, the court might give the orders of liquidation of the company. This requires the company to pay its debt within 21 days.

• Creditors voluntary liquidation

It is some sort of similar to that of the court-ordered liquidation. The company’s shareholders do it voluntarily. No court application required

• Members of voluntary liquidations

The company’s shareholder initiates this procedure of winding up the affair of the company.

In this case, the state of the company is quite miserable. This is because in this situation., all the assets of the companies are sold and the company is left with some of the loans.

There are companies who provide the company liquidation services as well. They will guide you better with liquidation and will provide you more information about it as well
When people get to know the real meanings of all the three terms mentioned above, they get to know what their real situation is. In this way, the person or the company can get the idea what their next step should be.