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Finance Definitions Videos 800 videos

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Finance: What is Bankruptcy?
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What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...

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Finance: What is Bankruptcy? 260 Views


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Description:

What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They turn pockets inside-out, ping a bankruptcy judge, and then sell whatever residual value is retained in the company to the highest bidder.

Language:
English Language

Transcript

00:04

Finance a la' Shmoop what is bankruptcy well in the old days

00:10

this was bankruptcy you'd go to prison if you couldn't pay your bills and [People in prison for bankruptcy]

00:14

unfortunately there weren't and still aren't a lot of legal high wage earning

00:19

opportunities in prison working your way out of debt on the chain gang wasn't [Prisoners working outside]

00:23

really a thing back then so instead the burden would be on your family to pay

00:27

back the loan you'd promised to pay back and didn't ugly situation it paved the [Officer knocking on a prisoners family member to pay their debts]

00:33

way for some well today bankruptcy has a range of flavors that it comes in but

00:38

basically it exists as a legal vehicle to avoid the aforementioned situation a [Bankruptcy van driving]

00:43

bankrupt person and/or corporation stands in front of a judge they turn

00:48

their pockets inside out with a sad face and the judge then decide who will be [Person opens their pockets inside out in front of a judge]

00:53

paid when and how much well how does she decide the order for who gets paid back

00:59

when? well, it usually prioritizes employees and vendors owed a paycheck

01:03

above banks who have made a loan and under that umbrella all different types

01:08

of loans have different priorities if the bankrupt individual owns a home it's [bankrupt individual in his home on the toilet reading a newspaper]

01:12

usually sold out from under him and anything left after paying off the

01:16

mortgage is used to pay others even if you do survive a bankruptcy your credit

01:20

is pretty much ruined who's going to want to loan you money once you've

01:24

proven that you're not good with being loaned money yeah if you've defaulted in [a really low credit score chart for a bankrupt individual]

01:29

the past on promises to pay people back why wouldn't you do the same thing again

01:33

well remember that twenty dollars you loaned your buddy Eric that he never [Person loaning 20 dollars to friend Eric

01:37

paid back well how eager are you going to be to hook him up with another twenty

01:41

especially since you'd only be feeding his betting on frog fighting habit yeah [Eric betting money on frog fighting]

01:46

not so much so long Eric you'll get the help you need!

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