Which of the following is NOT a real defense under the FAIDS principle?

Under the FAIDS principle, which outlines the defenses available to parties when dealing with contracts and financial obligations, the correct non-real defense is bankruptcy.

The FAIDS principle includes defenses such as forgery, infancy, and adjudicated insanity, which are classified as real defenses. Real defenses are valid against all holders of the instrument, meaning they can be used to invalidate a claim regardless of the party's status, including that of a holder in due course.

Forgery refers to a false signature on a document, which entirely invalidates the instrument. Infancy pertains to minors who lack the capacity to enter into binding contracts, thus allowing them to void agreements. Adjudicated insanity involves a court declaring an individual as legally insane, which also provides grounds to disaffirm contracts entered into during that period of incapacity.

In contrast, bankruptcy is generally viewed as a personal defense that only protects the debtor against creditors in the bankruptcy proceedings. It does not invalidate the underlying obligation in the same way that forgery, infancy, or adjudicated insanity do, thereby making it not a real defense under the FAIDS principle.