What is insolvency?

Unlike bankruptcy which only affects individuals in the UK, insolvency can apply to both companies and individuals.

A company is said to be insolvent if it doesn't have the assets to pay its debts as and when they fall due for payment. An insolvent company may go into administration, receivership or liquidation, but it cannot be made bankrupt.

A person is said to be insolvent if he or she is unable to pay bills and other debts as they fall due. Many of us find ourselves temporarily insolvent at one time or another - just before pay day for example - but it is a situation that can be resolved when the next pay packet arrives.

However, if there is little or no prospect of you being able to pay your debts, insolvency is more than a temporary phase. This is when you can consider making yourself bankrupt or indeed be made bankrupt by a creditor who is owed in excess of £750.