Insolvency describes the financial state of a debtor whose liabilities exceed their assets.

Default refers to the failure to meet an obligation under a contract, such as a failure to repay a debt on time.

Bankruptcy occurs when a company files for Chapter 11 or Chapter 7 protection under the U.S. Bankruptcy Code and defaults on its obligations. During bankruptcy, the court reviews the financial position of the defaulting entity and negotiates with management, creditors and sometimes equity owners in an attempt to maintain the business by selling assets and/or renegotiating financing arrangements with lenders.