The state or position of the person or entity who is incapable to meeting the liabilities even by selling off the assets possessed or by raising the funds either. Such state occurs when the debts are more than the revenues or assets.Under the law of bankruptcy, if a person is not able to meet his/her liability, some portion of the debt is waived off by the court and creditors do not get anything off that. It depends on the true position of the person.

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