Have you ever taken the time to notice how many small businesses close their doors while major corporations always manage to stay financially comfortable? Consider a specific scenario: when an individual was given a bank loan to start their business in New Jersey. An unexpected hurdle hindered them from paying off the remaining balance of their borrowed capital.
Keep in mind the title of the land this individual built their business upon does not belong to them. Until every cent of the money they borrowed from the bank gets reimbursed, the title is in the bank’s possession. This is how the government, through these significant banks, keeps millions of individuals, especially first-world countries, imprisoned.
Debt is something that you cannot eradicate because even the governments who keep the liquidity of their country in proper circulation don’t even know how to escape the debt they owe to those superior to them.
Most citizens are at the mercy of the banks. The government is also at the mercy of the top 1%, give or take.
Going back to the given scenario, the individual has two options before they surrender their business: Chapter 7 (liquidation) bankruptcy and Chapter 11 (reorganization) bankruptcy. Often, when a bank grants a large loan to someone, they will require another individual to co-sign on a loan, giving them 100% responsibility if the original loaner cannot repay the balance.
Will any bank ever fully forgive a loan?
Yes, but it’s a very strenuous process that requires a considerable amount of extra money. It depends on many factors, such as the loaner\’s credit score and their financial reputation, per se.
With liquidation bankruptcy, it’s generally forgiven if one’s assets are cashed to pay off most of the loan and the running balance. In most cases, businesspeople will resort to this option first, considering it is relatively time-efficient and affordable.
On the other hand, reorganization bankruptcy is the other viable route one can choose to take. A portion of the loan is forgiven. However, the remaining capital is divided into reasonable monthly payments, usually over 3 to 5 years.
This is often the last resort because it takes much 5 to 10 times longer than liquidation bankruptcy would; the advantage is that you can still keep your house, your car — all the prized material possessions you couldn’t easily surrender.
Filing for bankruptcy happens more often than one would think, especially in the current state of our society, financial instability is overwhelmingly rampant. It’s a challenging situation to imagine, let alone to be in. This is the reason why students must be taught basic accounting and budgeting because placing your finances in the hands of the wrong person is one of the most dangerous things one could do. Proper education has the power to avoid difficult circumstances in the years to come. If only this type of education were easily accessible across the globe, perhaps we wouldn’t be where we are today.