What is insolvency?

Insolvency is when someone or something can't pay what they owe anymore.

Imagine you have a piggy bank full of coins, that's like your money. When you buy candy or toys, you take coins out of the piggy bank. If you keep spending without adding more coins, one day you’ll try to buy something, but there won’t be enough coins left in the piggy bank.

Insolvency is like when your piggy bank is empty, and you still need to pay for things. You might have to borrow coins from a friend or family member, that's like getting help to pay what you owe.

Sometimes, if you keep borrowing coins, you might end up with more debts than coins. That’s when people say you're insolvent, it means your piggy bank is too empty to cover all the coins you need to give back.

But don’t worry! Just like you can fill your piggy bank again by saving more coins, someone who is insolvent might find new ways to earn money or get help from others.