Definition - What does Insolvency mean?

Generally, insolvency is the state of a person or entity that cannot pay their debts or is currently under some type of bankruptcy. In other words, being in a state of insolvency means that if all of the assets were liquidated, then the person would still be in a position where they could not pay off all of their debts.

Justipedia explains Insolvency

In the United States, the term insolvency specifically refers to when a person or entity cannot pay their debts or when a person or entity is insolvent as defined by the Bankruptcy Code. Typically, when a person or entity in the United States becomes insolvent, then they will file for one of the various types of bankruptcy offered in the United States.

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