Welcome to RSM's Business Recovery Video Series, where we tackle the tough questions about bankruptcy and insolvency in bite-sized two-minute segments. 

In our first episode, Gavin Stacey, RSM Business Advisory Principal, sits down with Greg Dudley, RSM Partner in Restructuring and Recovery, to unravel a common conundrum: What is the difference between bankruptcy and insolvency?

Greg breaks it down, clarifying that insolvency is more of a conceptual state, indicating an inability to meet financial obligations, while bankruptcy is a concrete fact, applicable to individuals and partnerships in Australia. 

Join us as we demystify the complexities of financial hardship and explore pathways to take control of your business.

Gavin Stacey, RSM Business Advisory Principal, asks Greg Dudley, RSM Partner Restructuring and Recovery:

"What is the difference between bankruptcy and insolvency?"

Gavin Stacey:
Hi I'm Gavin Stacey a principal in RSM's Business Advisory Division. I've got with me today Greg Dudley,  a partner in our Restructuring and Recovery division at RSM.

Welcome to our first business recovery video series um which we explore all things insolvency, bankruptcy, asset protection and look at ways in which we can help you take control and support your business through financial hardship.

Greg, what is the difference between bankruptcy and insolvency?

Greg Dudley: 

Good question. Two very different things. 

Insolvency is more of a concept, I think in my mind created by media and accountants and lawyers to confuse people because insolvency is just the definition that you're not solvent, and you can't pay your debts as and when they're due. 

So you could have cash flow insolvency, so you can go in and out of cash flow insolvency or balance sheet you don't have enough assets.

That's probably not the important thing, as it's just an overriding umbrella definition. 

Bankruptcy is actually a fact. If you if a person and it's a personal appointmen. If a person's bankrupt they are bankrupt they're going to be bankrupt for 3 years and it has a whole lot of effects.

Gavin Stacey:
So you did mention bankruptcies a personal appointment.

I mean it gets interchanged between companies and whatnot so can you just clarify that point?

Greg Dudley: 
Yeah good very good point again because in America they talk about bankruptcy and they chop in the companies as well as as well as persons.

In Australia, the law is different. Bankruptcy is just for just for individuals and Partnerships whereas corporate entities is a different uh a different type or regime.