Insolvency

If we say we’re insolvent, it means that our hot mess of a financial situation is so dire that, even if we sold off everything of value we own, we probably still wouldn’t be able to cover our debts. This may go without saying, but we’re going to go ahead and say it anyway: insolvency is a, uh...bad financial place to be, for individuals and for businesses.

“Sounds a lot like bankruptcy,” some might say, and to them we would say, “No!” Insolvency is not bankruptcy. Insolvency, while definitely not the greatest financial state to be in, can be temporary. Cash flow issues happen, right? If we’re broke-ish this month but have a huge sale going through next month, our current insolvency isn’t the end of the world. Also, if we or our business is looking a little insolvent, we can make arrangements with our creditors so we don’t default on our debts or get forced into liquidating our assets. Bankruptcy is what happens when we can’t correct our insolvency, and need to involve the courts to get our financial selves squared away and our debts paid.