“Insolvency” is a term used to describe a financial status of an individual or corporation. Being “insolvent” means that a person (or business) is not able to repay all their debts, or that the debts owing are more than the sum total of the assets they own.
The state of insolvency could arise in many different types of situations. If your assets are worth more than the total amount of your debts, you may still be considered insolvent if you have ceased paying your obligations as they become due.
In order to file for bankruptcy, a person (or business) must be insolvent – however, simply being insolvent does not mean that they are also bankrupt, or that they must declare bankruptcy. Calculating whether a person or business is in fact insolvent is done “on paper”, whereas declaring bankruptcy is a specific legal process and undertaking.
Determining whether you are insolvent can be quite simple in some cases and complex in others, depending on the situation and assets and debts involved. It is always best to connect with a Licensed Insolvency Trustee who can help you assess the situation and explain the options available to you to move forward to deal with your debts.