Iflas (also written iflās) (إفلاس) is Arabic for bankruptcy. It is a situation when a person’s liabilities exceed his assets. More specifically, it the state when a debtor fails to pay off his debts (duyun) because he owes more than he owns. Debt can be discharged in specific cases: death (of a natural person), payment and performance, and fraud or excuse). However, iflās does not take place unless qualified creditors file a suit against their defaulting debtor to the court of law. Iflās may result from (a) balance sheet insolvency, in which case liabilities exceed assets, and (b) income statement or cash flow insolvency, in which case, there are insufficient liquid assets to pay debts as they fall due.

Taflis (تفليس)  is Arabic for judgment of bankruptcy (iflas) or declaration of bankruptcy by the court of law. In shari’a parlance, it stands for interdiction (hajr– حجر) due to unsettled debt (dayn), in which case the court prevents (interdicts) the insolvent debtor from disposing of his wealth. Prevention remains effective till the debtor’s wealth is liquidated and divided among creditors in proportion to their debts (i.e., on a pro rata basis). The judgment of bankruptcy is issued when the creditors formally request interdiction of the creditor’s wealth.

In short, taflis is the legal process whereby an insolvent debtor is declared bankrupt (muflis)- i.e., in a state of bankruptcy (iflas). Hence, a bankruptcy proceeding under shari’a law is always an involuntary proceeding (as opposed to the voluntary bankruptcy proceedings incorporated in secular bankruptcy and insolvency regimes).