What is insolvency?

The concept of insolvency is a legal situation in which the company finds itself when it does not have liquidity enough to meet the payment of the company's obligations. In this way, insolvency is defined as the inability of a person or company to pay its debts.

The insolvency of a company occurs, in accounting terms, when its current assets is less than the liability. The serious solvency problems of a company can lead to suspension of payments. This does not imply that the company is bankrupt, since the bankruptcy It occurs when the total assets of the company are less than all the debts incurred.

When a company is insolvent, does not get rid of the obligation to pay its debts, but instead enters bankruptcy to see that the company cannot pay and a payment plan for its obligations is established. In addition, insolvency has consequences such as the impossibility of obtaining new lines of credit that allow the company to finance.

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