Insolvency Legal Meaning and Definition

Here is a simplified definition of the legal term Insolvency.

Insolvency (noun): This legal term describes the state in which an individual or an organization cannot pay its debts or meet its financial obligations. This often happens when debts are higher than assets or income. It can lead to bankruptcy, and the courts may release the insolvent party from some portion of their debt. This relief is typically at the expense of creditors, who may lose out on repayment.