insolvabilitate

Insolvabilitate (insolvency) is the financial state in which an individual or an entity cannot meet its due financial obligations or where liabilities exceed assets. It can be understood in two forms: cash-flow insolvency (inability to pay debts as they fall due) and balance-sheet insolvency (negative net worth).

Insolvabilitatea often arises from insufficient liquidity, poor cash management, excessive leverage, or adverse economic conditions. Indicators include repeated missed payments, ongoing debt restructuring, and formal default on obligations. Insolvency is typically recognized or declared by courts or regulatory authorities under applicable law.

When insolvability is established, formal procedures may be opened to either restructure the debtor’s activities or liquidate assets. Common aims are to maximize value for creditors while preserving a viable business when possible, or to wind down operations in an orderly manner. Procedures may involve a temporary standstill on some payments, appointment of an administrator or trustee, and a defined ranking of creditor claims.

Insolvency and bankruptcy are related but not identical concepts in all jurisdictions. Insolvency describes a financial condition; bankruptcy is a court-supervised procedure that may follow. Not all insolvent entities undergo bankruptcy; they may pursue reorganizations, workouts, or debt settlements.

The topic of insolvency is central to corporate and consumer finance, creditor protection, and economic policy. Effective insolvency regimes seek to balance debtors’ and creditors’ rights, facilitate resolution of distressed ventures, and mitigate systemic risk.