Accounting Insolvency

  

Negative net worth of a company...that's when this happens. You know the key formula, ALE: Assets minus Liabilities equals Equity. In this case, liabilities are larger than assets, so from an accounting perspective, the company is, well, worthless. Sorry. Just keepin' it real, sad company.

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Finance: What is Bankruptcy?260 Views

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

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

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

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

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

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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]

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

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

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

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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]

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

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

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

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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]

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

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

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

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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]

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

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

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

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

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

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