What term describes the condition of being judicially declared insolvent?

• A. Bankruptcy
• B. Foreclosure
• C. Liquidation
• D. Insolvency

Answer: (A)

Bankruptcy is the formal legal declaration that a person or business cannot pay its debts, issued through a court process. This is the term that best fits “being judicially declared insolvent” because insolvency itself describes a financial state (liabilities exceeding assets or inability to pay) but does not by itself involve a court order. Foreclosure relates to a lender seizing property when a loan defaults, not a blanket declaration of insolvency. Liquidation refers to selling assets to satisfy debts, which can occur within bankruptcy or as a separate dissolution process. So the judicially declared insolvency specifically points to bankruptcy.