The Terms Bankruptcy and Insolvency Mean Two Different Things

question 28

Multiple Choice

The terms bankruptcy and insolvency mean two different things.An insolvent person is defined as someone unable to pay his or her bills as they become due.Bankruptcy,on the other hand,involves:

• A)a process whereby a debtor's assets are actually transferred to an official who ultimately distributes them to the unpaid creditors.
• B)a process that is detailed in provincial bankruptcy laws across the country.
• C)a process which is intended to punish the debtor.
• D)a process that strips away privileged position of secured creditors with respect to assets taken as security and treats all creditors the same.
• E)a process that includes jail sentences to debtors for attempts to discharge inordinately high amount of debt.

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Definitions:

Guaranty

Guaranty is a legal commitment by a guarantor to pay a debt or perform an obligation if the original debtor fails to do so.

Cosigner

An individual who agrees to be equally responsible for the repayment of a loan if the primary borrower fails to pay.

Voluntary Agreement

A consensual arrangement between parties, often formalized through a contract, without coercion or duress.

Bankruptcy

A judicial process concerning an individual or business that is incapable of paying off its accumulated debts.