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-Webster’s Dictionary of Law. . 1996.

index bankruptcy, default, dishonor (nonpayment), failure (bankruptcy), indigence, poverty

Burton's Legal Thesaurus. . 2006

Insolvency means being unable to pay your debts. For a company, this essentially means that there is a deficit in your balance sheet; your tangible assets are less than your liabilities, and your business does not generate sufficient surplus revenue to fill the gap. If you have surplus assets in your balance sheet but are making losses, you become insolvent when the losses will consume the surplus assets. Solvency is measured in the context of voluntary winding-up and similar procedures when the directors can declare that the company will be able to pay its debts as they fall due for the next twelve months.

Easyform Glossary of Law Terms. — UK law terms.

1. inability to pay debts as they fall due.
2. excess of liabilities over assets.
The Insolvency Act 1986 is essentially a legislative code governing insolvency proceedings. The practice in insolvency proceedings (insofar as it is not laid down in the Act) is governed by Insolvency Rules made under the Act.
In the Scots law, a distinction is made between absolute insolvency and apparent insolvency. Absolute insolvency means that the debtor's assets, if realised, would not meet his liabilities even if able to pay his way. Apparent insolvency means the inability to pay debts as they are demanded. The Insolvency Act 1986 regulates procedure in Scotland as much as in England. In matters of personal insolvency, however, the law in Scotland is as set out in the Bankruptcy (Scotland) Act 1985 as amended by the Bankruptcy (Scotland) Act 1993.

Collins dictionary of law. . 2001.

1) Generally, the state of having more debts than assets or being unable to pay debts as they come due.
2) For tax purposes, when a person who has had a debt cancelled still has more debts than assets. Someone who is insolvent even after a debt is cancelled does not have to pay income tax on the amount of the cancelled debt.
Category: Bankruptcy, Foreclosure & Debt → Debt & Collection Agencies
Category: Personal Finance & Retirement → Taxes

Nolo’s Plain-English Law Dictionary. . 2009.

insolvency (individual)
England, Wales
An individual is insolvent if he has insufficient assets with which to discharge his debts and liabilities. This is, essentially, a question of fact, rather than one of law. Sections 267 and 268 of the Insolvency Act 1986 set out circumstances in which an individual is deemed unable to pay his debts in the context of a bankruptcy petition issued by one of the individual's creditors. The terms of these sections are often adopted in practice as a definition of personal insolvency. They provide that an individual is unable to pay his debts if the individual owes more than £750 to a creditor and one of the following two conditions applies:
• The individual has not settled or otherwise compromised a statutory demand for the debt in question within three weeks of being served with the demand (and has not applied to court to set aside the statutory demand).
• The creditor has attempted execution (where the debt arises from a court judgment) or other enforcement process against the individual in respect of the debt without success.
insolvency (corporate)
England, Wales
A company or partnership is insolvent if it has insufficient assets with which to discharge its debts and liabilities, which is essentially a question of fact rather than one of law. Different tests to determine insolvency apply, depending upon the context in which the expression is used.
When referring to a state of insolvency, the Insolvency Act 1986 (1986 Act) uses the phrase "unable to pay its debts". Section 123 of the 1986 Act provides that a company is deemed to be unable to pay its debts where:
• The company has not paid, secured or compounded a claim for a sum due to a creditor exceeding £750 within three weeks of having been served with a written demand in the statutory form (known as a "statutory demand").
• A creditor has attempted execution or other enforcement process against the company in respect of a debt without success.
• It is proven to the satisfaction of the court that the company is unable to pay its debts as they fall due (cash flow test).
• It is proven to the satisfaction of the court that the value of the company's assets is less than its liabilities, taking into account contingent and prospective liabilities (balance sheet test).

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

n. The status of being unable to pay one's debts when due.

Webster's New World Law Dictionary. . 2000.

An incapacity to pay debts upon the date when they become due in the ordinary course of business; the condition of an individual whose property and assets are inadequate to discharge the person's debts.

Dictionary from West's Encyclopedia of American Law. 2005.

An incapacity to pay debts upon the date when they become due in the ordinary course of business; the condition of an individual whose property and assets are inadequate to discharge the person's debts.

Short Dictionary of (mostly American) Legal Terms and Abbreviations.

   1) the condition of having more debts (liabilities) than total assets which might be available to pay them, even if the assets were mortgaged or sold.
   2) a determination by a bankruptcy court that a person or business cannot raise the funds to pay all of his/her debts. The court will then "discharge" (forgive) some or all of the debts, leaving those creditors holding the bag and not getting what is owed them. The supposedly insolvent individual debtor, even though found to be bankrupt, is allowed certain exemptions, which permit him/her to retain a car, business equipment, personal property and often a home as long as he/she continues to make payments on a loan secured by the property.
   See also: bankruptcy

Law dictionary. . 2013.

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