Insolvency
Paul & Mark: As long as you guys are debating insolvency, you should both do so with the following information in mind.
Insolvency is usually determined in one of two ways:
The 1898 Act captured these two notions of insolvency and they remain in common use. A firm is insolvent "in the equity sense" if it is unable to pay its debts as they come due. It is insolvent "in the bankruptcy sense," if its debts, fairly valued, exceed its assets, fairly valued. In the Bankruptcy Code, "insolvent" typically means liabilities, fairly valued, in excess of assets, fairly valued. §101(32). Insolvency in the equity sense enters into the Code indirectly. A debtor may defeat an involuntary petition by showing, among other things, that it is paying its debts as they come due. §303(h). Note that nowhere is one bound by what the balance sheet says.
-- "The Elements of Bankruptcy, Revised Edition," Douglas G. Baird, The Foundation Press, Inc., Westbury, New York, ©1992 & 1993, pg 73. |
