Your business is in a legal state of insolvency if either:

1. it cannot pay its business debts when they become due, or
2. the assets of the business are less than your debts.

A business in a state of insolvency may either seek protection under the law to allow a chance to reorganize or liquidate in an orderly fashion.

A competent bankruptcy attorney can help you understand the specifics involved, and ensure you file all proper paperwork.