Latin is where we find the etymological origin of the term insolvency that we are now going to analyze in depth. Exactly it derives from the word "insolventia", which can be translated as "that does not dissolve" and which is the fruit of the union of several lexical components of said language:
-The prefix «in-«, which means «no» or «without».
-The verb "solvere", which is equivalent to "release" or "release".
-The particle «-nte-«, which is a suffix used to indicate «agent».
-The suffix "-ia", which is used to indicate "quality."
The absence of solvency is called insolvency . The idea of solvency, in turn, refers to the lack of debt or the ability to pay that allows you to satisfy what is owed .
Insolvency, therefore, refers to the inability to pay a debt . Whoever is insolvent is not in a position to comply with a financial obligation.
For example: "We had to modify the project since it was leading us to economic insolvency" , "The increase in costs and the drop in passengers mean that almost all transport companies are in a situation of insolvency" , "I am worried "My brother-in-law's insolvency, I lent him money a year ago and he still hasn't paid me back anything."
Bankruptcy, crisis, debt, suspension of payments, impoverishment, ruin , indigence and even discredit are other words that function as synonyms for insolvency. On the contrary, among its antonyms are terms such as wealth, prosperity, guarantee or credit.
In the field of accounting , solvency is the indicator that relates the assets and liabilities of a person, whether legal or physical. If a company has total assets of 10,000 pesos and total liabilities of 5,000 pesos , the total asset/total liability ratio is 2 (for each peso of liabilities, it has 2 pesos of assets). If the situation were reversed, with a total asset of 5,000 and a total liability of 10,000 pesos , the entity would be in a situation of insolvency, since it would have 2 pesos of liabilities for each peso of assets.
At a legal level, the idea of insolvency is used with respect to the person who does not have the necessary liquidity to meet the payment of their obligations . Insolvency means the impossibility of satisfying a debt: upon entering into suspension of payments , a bankruptcy of creditors is carried out and a plan is established so that the debtor can comply.
It is important to establish, in addition to everything indicated, that there are two types of insolvency within the scope of bankruptcy law:
-Current insolvency is what occurs when the debtor cannot comply with its obligations when the creditors demand them, that is, when the aforementioned expire. In this situation, the legal obligation is imposed to proceed to request what is known as bankruptcy.
-Imminent insolvency, on the other hand, is what occurs when the company in question is threatened by a specific circumstance and calculates that it will not be able to comply with its obligations.