Insolvency is a financial condition experienced by a person or business entity when their assets no longer exceed their liabilities, commonly referred to as 'balance-sheet' insolvency, or when the person or entity can no longer meet its debt obligations when they come due, commonly referred to as 'cash-flow' insolvency. The term is often incorrectly used as a synonym for bankruptcy.
A state of insolvency generally leads to a legal finding of bankruptcy. However, because putting a person or entity into bankruptcy requires the payment of court fees, an insolvent person or entity may be insolvent and not legally bankrup.
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