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A decleration by a court of law that an individual or company is insolvent, that is, cannot meet its debts on the due dates. A bankruptcy petition may be filed either by the debtor or by its creditors requesting a receiving order. An inquiry into the debtor's affairs is the conducted by, in Britain, the official receiver, an official of the Department of Trade and Industry, who retains temporary control of the debotr's financial affairs. If he thinks fit, the receiver may call a meeting of the debor's creditors and, if they wish it, decalre the debtor bankrupt. The debtor's assets are then realized and distributed among his creditors either by the receiver or by trustee appointed by the creditors and apporoved by the Department of Trade. In the case of a company it goes into liquidation. Until he is discharged, i.e. has paid off his debts and has been declared a discharged bankrupt in law, a bankrupt may not incur credit in excess of £10 without making it known that he is undischarged bankrupt, nor may he serve as a director in a limited company without permission from the court.

Reference: The Penguin Business Dictionary, 3rd edt.