What Does It Mean To File For Insolvency?
If you are looking for information on what does it mean to file for insolvency then look below for the answer.
Many people often mix up the terms “insolvency” and “bankruptcy,” assuming them to mean the same thing. However, these two words, though similar, actually have different meanings. Simply speaking, insolvency is a financial state of being. Bankruptcy, on the other hand, is a legal process that serves the purpose of resolving the issue of insolvency.
Becoming insolvent is when it cannot pay its lenders back on time. In general, this occurs when the entity’s cash flow in falls below its cash flow out. For individual debtors, this means that their incomes are too low for them to pay off their debts. For companies, this means that the money flow into the business plus and its assets are less than its liabilities.