Methods for dealing with insolvency

Insolvency can be tackled either by employing the ‘liquidation’ method, i.e. bankruptcy procedure, or a ‘rehabilitation’ method, which takes the form of reorganisation (for large businesses) or debt relief (for individuals).

Insolvency law distinguishes three basic ways of handling a debtor’s insolvency or impending insolvency in insolvency proceedings – bankruptcy, reorganisation or debt relief. The Insolvency Act does not dictate which of the different insolvency methods is to be used by a particular debtor, but leaves the choice open. Besides the liquidation procedure (bankruptcy), there is also a rehabilitation element (reorganisation and debt relief). The choice of an appropriate method to address a debtor’s insolvency should be guided by concern for ensuring the best possible outcome for creditors.

Bankruptcy

Reorganisation

Debt relief