What Is Insolvent?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

A company or government is deemed to be insolvent when it cannot pay its debts (i.e. is due to default). It is insolvency if it is due to not actually having enough money to pay off the debt, whereas simply not being able to access the money (which is a problem in itself) is a lack of liquidity.

When an entity is insolvent, some or all of its assets can be liquidated to pay off those with a claim on debt. Insolvency is usually undesirable for both the lender and the borrower as the assets are unlikely to be sold at face value, and therefore there is usually in the best interests of both parties to attempt to make alternative payment arrangements.

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.