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Insolvent
The financial term "insolvent" or "insolvency" describes a monetary state of affairs in which a business or an individual has liabilities or debts in excess of their assets. This is referred to as "balance sheet insolvency," whereas a situation in which an entity or individual can no longer meet their debt obligations is known as "cash flow insolvency." The basic term "insolvent" is frequently and incorrectly used as a synonym for bankruptcy.
Insolvency does generally precede a legal determination of bankruptcy however a declaration of bankruptcy carries the requirement of paying various court fees. This leads to a situation in which a person or business may be insolvent but may not be legally bankrupt. In the United States an individual is said to be insolvent when that person is not paying debts in the ordinary conduct of their business or cannot pay those debts that have come due. (The U.S. Bankruptcy Code does address the definition of insolvency.)
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