Default is a situation where a borrower (such as a government, company, or individual) cannot meet their debt obligations, including the principal or interest, within the agreed-upon time frame. Default can occur due to a lack of funds, economic difficulties, or other factors.

Bankruptcy, in contrast to default, is a legally recognized state of insolvency where a debtor is acknowledged as unable to pay their debts, and their assets may be liquidated to satisfy creditors. Bankruptcy is typically a more formalized process governed by law, which may involve debt restructuring or asset liquidation.

Key Differences:

• Legal Status: Default is the actual failure to meet obligations, while bankruptcy is the legal process of recognizing insolvency.

• Consequences: Default can lead to penalties, a decrease in credit ratings, and other financial repercussions, but does not necessarily result in bankruptcy. Bankruptcy, however, involves the initiation of debt restructuring or asset liquidation procedures.

• Initiation: Default can occur automatically if the debtor fails to meet their obligations. Bankruptcy, on the other hand, requires an official court filing, either by the debtor or by creditors.