A legal state in which an individual or business can no longer meet their debt obligations when they are due, or when liabilities (debts) exceed assets. The main purpose of bankruptcy is to give an ‘honest’ debtor a fresh start by relieving them of their debts, subject to certain conditions. The term ‘bankruptcy’ is frequently and incorrectly used as a substitute for ‘insolvency’. oweverThe key difference is that the former is a legal status granted by a court of law, while the latter is a financial condition.

[BACK TO LAWS & REGULATIONS TERMS]