In today’s increasingly competitive competition scheme, many businesses end up disbanding for various reasons. Some are due to bankruptcy, but some are purely due to bankruptcy. There are also those due to both. Bankruptcy and bankruptcy are two different things and there are still few who can see the difference between bankruptcy and bankruptcy.
Yes, you heard it right. Bankrupt and bankruptcy are two things that each have different interpretations, characters or signs. Bankruptcy has different implications, as does bankruptcy. Therefore, it is important to be able to distinguish the difference between bankruptcy and bankruptcy so as not to misunderstand it later.
So what and how is the difference between bankruptcy and insolvency in a business context?
Let’s peel one by one about the differences between bankrupt and insolvent in this article so that we will not be mistaken in distinguishing them in the future. Let’s see the explanation below.
Bankruptcy Interpretation
One of the keys to knowing the difference between bankruptcy and insolvency is to know the general narrative of both. In other words, you must first know each definition of bankruptcy and insolvency. But at this point we will discuss bankruptcy first.
So, what exactly does bankruptcy mean?
Bankruptcy itself in Indonesia has its own legal umbrella where its regulation is through the Bankruptcy Law. For its own meaning, bankruptcy has an interpretation as a condition of a debtor who can no longer settle all his debts that have expired to creditors.
So from this interpretation, we can conclude that bankruptcy can occur if we have debts to two or more parties – either individuals or business entities, but we cannot pay the debt after the deadline.
The national law itself originally regulates the bankruptcy situation that we can file ourselves or on the submission of people who have receivables against our debts. Then, if the application is valid, the Commercial Court can later determine the bankruptcy decision or not.
This is one of the basic differences between bankruptcy and bankruptcy itself. In essence, bankruptcy refers to the inability to settle debts and its filing is usually by people who have receivables against our debts or our company.
But is it finished enough for the verdict to come down? Of course not.
After the verdict is made, then our assets or our company will be transferred to the management of the Curator who is supervised and appointed directly by the Commercial Court. The Curator’s task is to seize and sell our assets or the company to pay off the debts.
Even if we have received a bankruptcy decision, don’t worry, because if we feel that the decision is not correct, we can still file a cassation appeal to the Supreme Court so that they can check and hear it again.
Bankrupt Interpretation
If in the previous point we have discussed the issue of bankruptcy, then in this point we will discuss our second ‘provision’ in understanding the difference between bankruptcy and insolvency – namely the interpretation of the issue of bankruptcy itself.
What is bankruptcy and how does it differ from insolvency?
If we refer to the standard meaning, bankruptcy can mean a condition where our business experiences major losses which causes the business to close or go bankrupt.
There are several components that cause a business to close, including:
Poor Management
Maybe this is one of the general factors that can cause a company to go bankrupt. How could it not be, business management is the soul that drives a business. Without good management, it will be difficult for a business to run and survive, especially in the midst of increasingly tight competition like today.
Market Transformation and Competition
Customer changes that always move with the flow of the times are indeed not easy for every company to follow every time. But on the other hand, companies that cannot immediately adapt to this will find it difficult to develop and survive.
Ineffective Leadership
In an organization like a company, a leader is crucial. However, poor and ineffective leadership can actually trigger bad decision making, low integrity, and ineffective strategies.
Stumbled upon a Case
The legal aspect cannot be underestimated in business. The reason is, many companies fall because they cannot or do not comply with existing regulations which causes the company to be subject to many legal sanctions and causes many polemics that can lead to bankruptcy.
Difference between Bankrupt and Insolvent
We already know the differences between bankruptcy and insolvency, now at this point we will summarize it to make the aspects of these differences clearer.
The differences between bankrupt and insolvent can be explained as follows:
Substantial
The first aspect we can check from the difference in substance between the two conditions. Bankrupt is a condition where we cannot pay debts that have expired to two or more creditors. On the other hand, bankruptcy is a condition where a company suffers a big loss and has to close down because of the loss.
Financial
A bankruptcy situation can arise when we cannot pay debts to two or more parties and the time they have determined has passed.
In other words, companies in this situation do not necessarily have bad finances because in fact there are also businesses that are affected by this condition even though they are profitable. While businesses that go bankrupt or close down are certainly experiencing difficult finances that force them to close.
This is because we can see that a company is bankrupt from the cash flow deficit so that its operations cannot run and cause the company to close.
Legal Position
In terms of its legal position, it is also very different. Bankruptcy status itself comes from a decision that the Court has determined because of a request. After the decision, the assets of the bankrupt party will be transferred to the Curator to be managed in paying off the debt.
It’s different from bankruptcy. Bankruptcy status does not require a court decision to decide it. Bankrupt is just a term that refers to the state of a company that can no longer continue their business operations and closes permanently.
Finalization
The settlement of bankruptcy conditions is through a Curator, where the Curator will manage the assets of the bankrupt party and then manage and sell them to pay off the debts of the bankrupt party.
But for bankruptcy, there is no standard finalization that accompanies it. Bankrupt companies tend to accept the condition and then open a new page from the bankruptcy of their business.
FAQ
Is bankrupt the same as insolvent?
No, bankruptcy and insolvency are two completely different business conditions.
Why can a business go bankrupt?
Businesses can go bankrupt due to several factors such as poor management, market dynamics, ineffective leadership and legal issues.
In what ways are there differences between bankrupt and insolvent?
There are several factors that differentiate bankruptcy and insolvency, including in terms of substance, finance, legal position, and finalization.