Insolvency & Reconstruction

Insolvency is the inability of a debtor to pay their debt.

Cash flow insolvency involves a lack of liquidity to pay debts as they fall due.

Balance sheet insolvency involves having negative net assets—where liabilities exceed assets. Insolvency is not a synonym for bankruptcy, which is a determination of insolvency made by a court of law with resulting legal orders intended to resolve the insolvency.

Reconstruction in law refers typically to the transfer of a company’s (or several companies’) business to a new company. The old company will get put into liquidation, and debtors will agree to take shares of equivalent value in the new company, or take a lesser amount for their debt.

Bankruptcy and Reconstruction scams are schemes we come across quite frequently, it works like this; you pay a substantial sum of money to a firm or individual who will propose to take you through a process that will allow you to retain your assets whilst dumping all your creditors or making them wait for years to be paid.

One recent client had agreed to pay $16,000 to one such scammer, and paid $6,000 up-front to enable her to keep her negative equity in her house. We set her on the right track, got $4,500 of the $6,000 back and charged her $350.00 for a half-hour’s work. Forgot to mention, we never met the person, all done by phone.

The carpenter with a tribe of children, a crushing tax bill and proceedings in the Federal Court was quoted $40,000 to fix his problems and save his house. We set him on the right track too. We charged him $500.00 and his wife purchased his equity in the house.