Insolvency is a term used to describe an individual or business's inability to pay their debts. It is a legal status that can be declared by a court of law when a debtor is unable to pay their creditors. INSOLVENCY can also refer to the state of being insolvent, which is when a person or business has more liabilities than assets. This can lead to bankruptcy, which is a legal process that allows a debtor to be released from their financial obligations.