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Welcome to our lesson on insolvency, a fundamental concept in the world of finance. Insolvency refers to the state of being unable to pay debts owed, whether it be by an individual or a business. This can occur for various reasons, such as mismanagement of finances or economic downturns. When one reaches a point of insolvency, they may have to declare bankruptcy, a legal process used to address outstanding debts.
Declaring bankruptcy can have significant implications, as it involves liquidating assets to pay back creditors. This is why it is crucial