insolvency


insolvency
/in sol"veuhn see/, n.
the condition of being insolvent; bankruptcy.
[1650-60; INSOLV(ENT) + -ENCY]

* * *

Condition in which liabilities exceed assets so that creditors cannot be paid.

It is a financial condition that often precedes bankruptcy. In the context of equity, insolvency is the inability to pay debts as they become due; insolvency under the balance-sheet approach means that total liabilities exceed total assets.

* * *

      financial condition in which the total liabilities of an individual or enterprise exceed the total assets so that the claims of creditors cannot be paid. There are essentially two approaches in determining insolvency: insolvency in the equity sense and under the balance-sheet approach. Insolvency in the equity sense denotes the inability of the debtor to pay his debts as they become due in the ordinary course of business. Insolvency under the balance-sheet approach means that the total liabilities of the debtor exceed his total assets.

      Insolvency is distinguished from bankruptcy in that bankruptcy denotes a particular legal status to be determined and declared by judicial decree. For an individual or a corporation to be declared bankrupt, certain additional requirements, such as committing an act of bankruptcy, for example, are necessary. Thus, insolvency, although an essential factor, is not the sole ingredient necessary in determining bankruptcy.

* * *


Universalium. 2010.

Synonyms:

Look at other dictionaries:

  • Insolvency — means the inability to pay one s debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts. Business insolvency is defined in two different ways: Cash flow insolvency Unable… …   Wikipedia

  • insolvency — in·sol·ven·cy /in säl vən sē/ n pl cies 1: the fact or state of being insolvent compare bankruptcy 2: insufficiency (as of an estate) to discharge all enforceable debts ◇ Insolvency matters are covered under the Bankruptcy Code. Merriam …   Law dictionary

  • Insolvency — In*sol ven*cy, n.; pl. {Insolvencies}. (Law) (a) The condition of being insolvent; the state or condition of a person who is insolvent; the condition of one who is unable to pay his debts as they fall due, or in the usual course of trade and… …   The Collaborative International Dictionary of English

  • insolvency — (see also bankruptcy and failure) another term used to describe a firm that is failing; generally it means that a firm s liabilities exceed its assets or that it is unable to satisfy its obligations as they come due. (Common Bankruptcy Terms)… …   Glossary of Bankruptcy

  • insolvency — 1660s; see INSOLVENT (Cf. insolvent) + CY (Cf. cy). Insolvence (1793) is rare …   Etymology dictionary

  • insolvency — [in säl′vən sē] n. pl. insolvencies the fact or condition of being insolvent; bankruptcy …   English World dictionary

  • insolvency — The lack of adequate capital. The condition that exists when the amount of losses exceeds the amount of capital. See solvency and solvency risk. American Banker Glossary This occurs when individuals or businesses do not have enough assets to… …   Financial and business terms

  • insolvency — The insufficiency of the entire property and assets of an individual to pay his debts. 29 Am J Rev ed Insolv § 2. In a practical commercial sense, the inability of a person to pay his debts as they become due in the ordinary course of his… …   Ballentine's law dictionary

  • Insolvency — When an individual or organization can no longer meet its financial obligations with its lender or lenders as debts become due. Insolvency can lead to insolvency proceedings, in which legal action will be taken against the insolvent entity, and… …   Investment dictionary

  • insolvency — The condition of a person or business that is insolvent; inability or lack of means to pay debts. Such a relative condition of a person s or entity s assets and liabilities that the former, if all made immediately available, would not be… …   Black's law dictionary


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.