Example Of Bankruptcy Essay

Bankruptcy is a legal situation that organizations or individuals may fall into when the current assets in the organization are not able to pay for the debts as they become due. The individuals or organizations that are not able to meet their debt payment obligations may be forced to file for bankruptcy. The debtors also may file for the same if the individuals who owe them have failed to pay the debt and a specified period of time that vary from one country to another has expired.
Both individuals who are owed by the bankrupt and those being declared bankrupt benefit from the situation. The bankrupt individuals and organizations such as companies, businesses, and people benefit if they are not in a position to manage their assets and pay their debts. The pressure from the debtors is eliminated and some debts may be cancelled if bankruptcy declaration is made. The debtors and financial institutions also benefit from bankruptcy since their debts are paid in the order of priority.
Since filing a bankruptcy is an easy way of eliminating financial problems for some people and organizations, it is advantageous if the process is made to be more expensive. If the process is expensive, the managers of companies and other organizations and individuals will reduce their borrowing and use the money they have more wisely to avoid bankruptcy. Unnecessary expenditures of individuals and organizations will be eliminated to avoid bankruptcy.
Management and individuals wishing to file bankruptcy will find it more economical to manage the debts instead of filing bankruptcy. This is after considering that bankruptcy situation is expensive. Bankruptcy involves unnecessary expenditure and making it expensive will ensure that the management avoids these costs as much as possible.
It can be concluded that making bankruptcy more expensive can be effective in discouraging overspending. This is because people and organizations will utilize the borrowed funds effectively. It also makes people and organizations involved to prioritize payment of debts hence less amounts of money will be available to overspend.