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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.
This entry comes from Encyclopædia Britannica Concise. For the full entry on insolvency, visit Britannica.com.