Insolvency vs. Bankruptcy

The definition of insolvency

Bankruptcy and insolvency are not the same, as many people think. Simply speaking, a person or business entity is insolvent when he, she, or it does not have sufficient assets to pay all debts that are due.

For New York, the insolvent definition is contained in the New York Debtor & Creditor (DCD) law section 271, which states:

  1. A person is insolvent when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured.
  2. In determining whether a partnership is insolvent there shall be added to the partnership property the present fair salable value of the separate assets of each general partner in excess of the amount probably sufficient to meet the claims of his separate creditors, and also the amount of any unpaid subscription to the partnership of each limited partner, provided the present fair salable value of the assets of such limited partner is probably sufficient to pay his debts, including such unpaid subscription.

The definition of bankruptcy

Bankruptcy is a legal process in which a debtor declares his or her debts and the government provides debt relief to the debtor. There are essentially two forms of bankruptcy. Under Chapter 7 of the Bankruptcy Code, debtors’ assets are sold for the benefit of creditors. Most of the remaining debts are wiped out (discharged). A Chapter 11 or Chapter 13 bankruptcy reorganizes the debts to make them more affordable for the debtor to pay them.

Thus, insolvency is a financial condition that requires a solution. Bankruptcy is one solution. But there are other debt relief solutions to insolvency, such as:

  • Asset protection
  • Debt consolidation & negotiation
  • Loan modification
  • Avoiding foreclosure & foreclosure defense
  • Short sales

If your or your business is insolvent, let an experienced bankruptcy lawyer get you the debt relief you need in Brooklyn, Bronx, Manhattan, Staten Island, and Long Island

If you live in the New York City area, contact The Law Office of Gregory Messer online or at 718-717-2368 to schedule a free initial consultation. Our office is located across the street from the U.S. District Bankruptcy Court in Brooklyn and is close to the Borough Hall and Court Street subway stations. We serve residents throughout New York City and Long Island.

To ensure every client receives the personal attention he or she deserves, we are an appointment-only law firm with flexible hours adjustable to fit your needs.

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