Insolvency

Insolvency is when an individual or organization can no longer afford to pay the debt on their liabilities. This situation arises when liabilities exceed the value of the company’s assets or when a debtor is unable to pay the debts they owe. Insolvency can result from various situations leading to poor cash flow, such as poor investment decisions, rapid expansion, or economic crises.

When a person or company becomes insolvent, they may need to undergo legal processes like bankruptcy to manage their debts. This can impact all parties involved, including creditors, employees, and investors.