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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.

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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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