Deficit Net Worth

DEFINITION of 'Deficit Net Worth'

A scenario in which liabilities are higher than assets. Deficit net worth can occur for a variety of reasons, but typically it arises when current or future asset values erode unexpectedly. For example, when home values fall, often one is left owing more on their mortgage than the home is presently worth. Likewise, in frontier days, land and property often gained or lost value suddenly depending on where the nearest railroad was located. Also known as negative net worth.

BREAKING DOWN 'Deficit Net Worth'

A negative, or deficit, net worth does not necessarily imply bankruptcy. Just as quickly as asset values can plunge, they can also rise. However, a deficit net worth can negatively influence future financing opportunities and stifle future business growth. If you'd like a tool to determine if you're experiencing a negative net worth you can use our free Net Worth Tracker which allows you to calculate, analyze and record your net worth for free.

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RELATED FAQS
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    Net worth is determined by calculating financial assets versus liabilities. As the liabilities increase versus the assets, ... Read Answer >>
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    Discover what your specific assets and liabilities are and how to classify the components that go into calculating your net ... Read Answer >>
  3. What are the differences between personal and business tangible net worth?

    Understand what the term tangible net worth represents, its significance, and how the calculation of net worth differs for ... Read Answer >>
  4. When evaluating an individual's current financial status, liquid net worth would ...

    The correct answer is B). Total net worth is defined as all assets minus all liabilities. Liquid net worth is all assets ... Read Answer >>
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