An insolvent person is either someone who cannot repay the debts they have incurred or someone who has more debts than assets.

When they do not have the necessary funds to cover the amount owed, or because the accumulated interest on the debt is too high, an insolvent person will no longer be able to make monthly payments. They will then be considered in default, which will have negative consequences on their credit history. The insolvent person risks facing legal action and asset seizures. In some cases, they may even be excluded from the credit market for a certain period and may need additional time to recover financially.

Being insolvent is a necessary condition for filing a consumer proposal or bankruptcy.