Testing for Insolvency

Completing a successful bankruptcy is a long and intricate process that can be intimidating or confusing at the outset. Insolvency and bankruptcy are often confused and taken to mean the same thing. However, insolvency is merely a factor in bankruptcy, and refers to an inability to pay one’s obligations.

Assessing the extent to which your situation is insolvent can be difficult. Fortunately, the West Palm Beach bankruptcy lawyers of Eric N. Klein & Associates, P.A., can help you to more fully appreciate the ramifications of your current situation. Contact us at 516-353-2800 today.

Are You Insolvent?

One method of determining insolvency is calculating disposable income is and weighing that against monthly debt payments. This test is most beneficial to those who rent or do not have large assets. In order to calculate your disposable income you must subtract all your household expenses (i.e. taxes, bills, food costs, living costs, etc.), excluding your debt payments, from your total monthly income. If this amount is enough to cover your repayments, then you are solvent.

Another test that you can use is more applicable to home owners and those with a number of large assets. To measure this way, add up the value of your house and other major assets you have, then subtract the total amount of outstanding mortgage and car debt you have from the first value. If this number is positive and greater than your current debt payments, you are considered solvent. If you own any major assets, it is important to perform both the first and second test to determine your solvency.

Contact Us

Not being sure of your financial status can be stressful. Discovering that you are insolvent and may need to declare bankruptcy can help you to avoid further financial calamity. Contact the West Palm Beach bankruptcy attorneys of Eric N. Klein & Associates, P.A., for the compassionate and experienced counsel you need. Call us today at 516-353-2800.