Insolvency
Quick Definition
The state of being unable to pay debts as they become due.
Full Explanation
Insolvency occurs when an individual or business is unable to pay their debts as they become due. In Canada, insolvency can lead to two primary legal processes: bankruptcy and consumer proposals, both governed by the Bankruptcy and Insolvency Act and administered by a Licensed Insolvency Trustee (LIT). A person is technically insolvent when their total debts exceed the total value of their assets, or when they cannot meet their regular debt obligations. Early consultation with a LIT is free and can help explore all available options.
Related Terms
Bankruptcy
A legal process for individuals unable to repay debts, offering a fresh financial start.
Consumer Proposal
A legal alternative to bankruptcy where you offer to repay a portion of your debts.
Default
Failure to make required loan payments as agreed with the lender.
Debt Consolidation
Combining multiple debts into a single loan, typically at a lower interest rate.
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