[calicpa]

I am using CPAexcel and wiley test bank. They contradict each other on the definitions of bankruptcy and equity solvency.

CPAexcel:

banruptcy solvency = meet its obligations as they come due

equity solvency = assets meet liabilities

Wiley test bank:

A debtor need only prove that s/he is solvent in the equity sense (i.e., that s/he is paying her/his debts as they mature)

The debtor need not prove that her/his assets exceed her/his liabilities (solvency in the bankruptcy sense).

Which is correct? For those of you using becker, what do they say? Thank you

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[Anonymous]

the “due or not due” concept is used when petition is contested (some parties may think the debtor doesn't need to file a bankruptcy petition but other parties disagree). if the petition is contested and can't be settled, no order of relief will be given. this is the exception concept, the general concept of insolvency is that the liability > asset and the debtor goes bankruptcy INVOLUNTARILY.

filing petition actually has nothing to do with the point that whether the debtor is qualified for bankruptcy. some debtors may have the ability to pay debt, or some malicious creditors just want to ruin debtor's business. in such situation, the petition may be challenged. court will weight upon 2 factors: whether the debtor can pay the debt (bankruptcy insolvency as you said) or the other one (forgot)…it happens often in VOLUNTARY bankruptcy…in voluntary bankruptcy, debtor may have asset > liability (they may stand on the edge of bankruptcy)…anyway, i think u get it…just remember when to “bankruptcy insolvency”…

BTW, question can be very tricky, but i never met these two “insolvency” together in the choice…be careful in the exam.

[Author]

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