What is the legal procedure called where an entity seeks protection through a court?

The legal procedure where an entity seeks protection through a court is known as bankruptcy. This process allows individuals or businesses that are unable to meet their debt obligations to obtain legal relief from creditors. In bankruptcy proceedings, the court assesses the financial situation of the entity and can either reorganize its debts to allow for repayment over time or liquidate its assets to pay off creditors, depending on the type of bankruptcy filed.

Bankruptcy provides a structured environment to address debts while protecting the entity from further collection actions during the proceedings. It often involves the appointment of a trustee who oversees the process, ensuring that the interests of both the debtor and creditors are balanced according to the law. The other options, such as insolvency, default, and liquidation, refer to different aspects of financial distress and do not capture the court-protected nature of the bankruptcy process itself.