Persons or businesses that cannot meet their financial obligations are insolvent.A company that has taken out large loans to remain in business may find itself insolvent if it can’t repay those loans when business slows down and profits dwindle. If a man owes $10,000 on his credit cards along with $200,000 on his mortgage, he has $210,000 of debt. If his house is worth $180,000 and he only has $9,000 of cash accessible, he’s insolvent by $21,000. Poor cash management, an increase in expenses or miscalculated revenue projections can cause insolvency. Legal action can be taken against an insolvent entity, including the liquidation of assets to pay off debts. Bankruptcy is one possible solution, but creditors will usually seek other payment arrangements before resorting to that. Debt restructuring is one alternative that’s generally better than declaring bankruptcy. Shares of some insolvent companies will continue to trade on the market. Those investments are among the riskiest available.