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Definition: Bankruptcy

Bankruptcy refers to a legal status in which a person/organization is insolvent i.e. the assets it has are insufficient to meet its liabilities/obligations. The status is given by a court generally when it is informed by one of the creditors of the firm/individual.

The important point to note here is that there can be different statuses during insolvency and therefore, insolvency is not exactly the same as bankruptcy everytime however they are used interchangeably.

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