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Title 28 — Judiciary and Judicial ProcedureRelease 119-73not60

§3302 Insolvency

Title 28 › Part VI— PARTICULAR PROCEEDINGS › Chapter 176— FEDERAL DEBT COLLECTION PROCEDURE › Subchapter D— FRAUDULENT TRANSFERS INVOLVING DEBTS › § 3302

Last updated Apr 5, 2026|Official source

Summary

A debtor is insolvent when they owe more money than the fair value of everything they own. If someone generally is not paying their bills when due, they are assumed to be insolvent. For a partnership, count the partnership’s assets plus each general partner’s extra personal net worth when comparing to the partnership’s debts. Assets do not include property moved or hidden to delay or cheat creditors or transfers that can be undone under this law. Debts do not include amounts secured by a valid legal claim (for example, a mortgage) on property that is not counted as an asset.

Full Legal Text

Title 28, §3302

Judiciary and Judicial Procedure — Source: USLM XML via OLRC

(a)Except as provided in subsection (c), a debtor is insolvent if the sum of the debtor’s debts is greater than all of the debtor’s assets at a fair valuation.
(b)A debtor who is generally not paying debts as they become due is presumed to be insolvent.
(c)A partnership is insolvent under subsection (a) if the sum of the partnership’s debts is greater than the aggregate, at a fair valuation, of—
(1)all of the partnership’s assets; and
(2)the sum of the excess of the value of each general partner’s non-partnership assets over the partner’s non-partnership debts.
(d)For purposes of this section, assets do not include property that is transferred, concealed, or removed with intent to hinder, delay, or defraud creditors or that has been transferred in a manner making the transfer voidable under this subchapter.
(e)For purposes of this section, debts do not include an obligation to the extent such obligation is secured by a valid lien on property of the debtor not included as an asset.

Legislative History

Notes & Related Subsidiaries

Statutory Notes and Related Subsidiaries

Effective Date

Section effective 180 days after Nov. 29, 1990, and applicable with respect to certain actions for debts owed the United States pending in court on that

Effective Date

, see section 3631 of Pub. L. 101–647, set out as a note under section 3001 of this title.

Reference

Citations & Metadata

Citation

28 U.S.C. § 3302

Title 28 — Judiciary and Judicial Procedure

Last Updated

Apr 5, 2026

Release point: 119-73not60