Test of Insolvency

A Test of Insolvency is a financial assessment used to determine if a person or company is unable to pay their debts when they are due. It examines whether their liabilities exceed their assets or if they are unable to meet payments as scheduled. This test helps creditors, courts, or regulators decide if insolvency procedures, like bankruptcy or other financial relief, should be initiated. Essentially, it evaluates financial health by assessing whether the individual or entity has sufficient resources to settle their obligations, guiding appropriate legal or remedial actions.