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How Does Bankruptcy Affect The Economy

Can I Run My Own Business

Bankruptcy: How does it affect my credit score?

Yes; however, you may face some restrictions. If you’re a sole trader, it’s your responsibility to make sure you fulfil your bankruptcy obligations.

Your business name should contain your full name. This allows people to search for your name on the National Personal Insolvency Index if they choose.

If your business name doesn’t contain your full name, you must tell all people you do business with that you’re bankrupt.

For example: David Smithis currently bankrupt. He has a sole trader business as a plumber. If his business name is ‘Daves Speedy Plumbing’, he must inform his clients that he’s bankrupt. If his business name is ‘David Smith Plumbing’, he wouldn’t need to inform anyone because it contains his full name.

Discuss this further with your trustee if you’re unsure of your obligations.

Direct queries regarding your Australian Business Number to the Australian Taxation Office .

If you have another type of company contact the Australian Securities and Investment Commission .

How Do Natural Disasters Affect The Economy

  • Arito OnoSenior economist, Mizuho Research Institute
  • Natural disasters such as earthquakes, floods, typhoons, and hurricanes inflict serious damage and so seem to be bad for the economy. For firms, natural disasters destroy tangible assets such as buildings and equipment as well as human capital and thereby deteriorate their production capacity. These adverse impacts may sometimes be fatal to the firms and result in them being forced to close down.

    But the academic evidence on the economic impact of natural disasters is mixed. As reviewed in surveys such as Noy and Vu and Loayza et al. , the existing studies report that natural disasters may even promote growth. One possible mechanism behind this positive impact is the enhancement of the productivity of the economys corporate sector as reported in Skidmore and Toya and Crespo-Cuaresma et al . But because these studies use aggregate data, they cannot answer why and how corporate productivity improves due to natural disasters. We thus need analyses that use micro-data to clarify the mechanisms through which natural disasters affect the productivity of an economys corporate sector.

    Natural disasters and corporate productivity: Creative destruction

    Natural disasters and corporate productivity: Firm selection

    Empirical approach on firm bankruptcy after the Tohoku Earthquake

    Evidence for natural selection

    References

    Footnotes

    Debt That Can’t Be Forgiven

    While bankruptcy can eliminate a lot of debt, it can’t wipe the slate completely clean if you have certain types of unforgivable debt. Types of debt that bankruptcy can’t eliminate include:

    • Most student loan debt .
    • Court-ordered alimony.
    • A federal tax lien for taxes owed to the U.S. government.
    • Government fines or penalties.

    What Happens When A Country Declares Bankruptcy

    When a country actually goes bankrupt, the International Monetary Fund is a good place to go. When the Greece economy crashed in 2009, they went to the IMF, the European Central Bank and the European Commission, who collectively, issued the first of two international bailouts for Greece, which would eventually total more than 240 billion.

    The bailouts came with conditions. Lenders imposed harsh austerity terms, requiring deep budget cuts and steep tax increases. They also required Greece to overhaul its economy by streamlining the government, ending tax evasion and making Greece an easier place to do business.

    When a country fails to pay its creditors on time, it is said to go into default, the national equivalent of going bankrupt. But sovereign defaults are quite different from business bankruptcies as it is far harder for creditors to repossess the assets of a sovereign entity than to repossess the assets of a company.

    In the first instance, to curry favour in international markets, defaulting countries tend to restructure their debt rather than simply refusing to pay anything at all. But these so-called haircuts, where the original value of a bond is reduced, can be much more painful for the holders of government bonds than a simple clip of the scissors.

    Thanks for reading, you can see more of my work on my website, The Global Millennial

    Do I Need To Tell The Official Receiver Or Trustee About My New Bank Account

    How Does the CARES Act Affect Bankruptcy Proceedings?

    You should tell the Official Receiver or trustee about any new bank account, and about any money in the account that is more than you need for reasonable living expenses. The Official Receiver or trustee can claim the surplus amounts to pay your creditors. If you fail to cooperate, he or she may intervene in the bank account.

    Once The Pandemic Is Over Is Inflation Inevitable

    No, its not.

    But it will have to be carefully managed.  If we continue to have all the money loaned out by the government and all the relief dollars floating around in the economy, then inflation is likely.

    Another scenario is that this is temporary and the government has ways, through the Federal Reserve and the Banking system, to slowly withdraw the supply of dollars changing hands.

    If policymakers can coordinate the slow withdrawal of these funds, then we have a good chance of meeting the 2% target inflation of the Central Bank.

    We can only control this indirectly through our participation in elected officials.  For now, we have to come together and weather the storm.

    How Bankruptcy Affects Investors

    Clearly, nobody invests money in a company, whether through its stock or its debt instruments, expecting it to declare bankruptcy. However, when you venture outside of the risk-free realm of government-issued securities, you are accepting this added risk.

    When a company begins bankruptcy proceedings, its stocks and bonds usually continue trading, albeit at extremely low prices. Generally, if you are a shareholder, you will usually see a substantial decline in the value of your shares in the time leading up to the company’s bankruptcy declaration. Bonds for near-bankrupt companies are usually rated as junk.

    Once the company goes bankrupt, there is a very good chance you will not get back the full value of your investment. In fact, there is a strong possibility that you won’t get anything back at all.

    As the SEC summarizes, “During Chapter 11 bankruptcy, bondholders stop receiving interest and principal payments, and stockholders stop receiving dividends. If you are a bondholder, you may receive new stock in exchange for your bonds, new bonds or a combination of stock and bonds. If you are a stockholder, the trustee may ask you to send back your stock in exchange for shares in the reorganized company. The new shares may be fewer in number and worth less. The reorganization plan spells out your rights as an investor and what you can expect to receive, if anything, from the company.”

    What If I Cant Afford To File For Bankruptcy Due To Covid

    There are usually high costs associated with filing for bankruptcy mostly due to lawyers fees but a free tool like Upsolve can be an alternative solution for those financially impacted by COVID-19. To date, Upsolve has relieved over $200 million in debt.

    In most states, you can file your bankruptcy paperwork electronically if you have a lawyer. However, anyone who uses Upsolve to fill out their bankruptcy paperwork will need to either mail or hand-deliver them. Pavuluri says its one of several ways the bankruptcy system discriminates against lower-income individuals.

    Hopefully we can educate legislators, judges and clerks to create a more user-friendly situation in the future, Pavuluri said.

    Although the outbreak is financially impacting individuals and businesses, he says people should not panic and file for bankruptcy without seriously analyzing their financial situation.

    You want to file for bankruptcy at your financial trough, Pavuluri said. Its important that you dont hurry into it.

    Bankruptcy Helps The Economy

    How Coronavirus Set Off A Bankruptcy Wave For The U.S. Economy

    Another major benefit of bankruptcy is that it can help to moderate the economy, restraining it from overheating during booms, but stimulating the economy when it is in a recession. Booms occur when people spend too much money within a short time; recessions occur when people do not spend enough. People tend to spend extra money when they have easy credit, then they spend less money repaying the debt: a direct cause of the boom and bust cycles.

    The central banks tried to stimulate the economy by lowering interest rates, but what good was low interest rates when people had no jobs and no credit? Banks would not grant them credit regardless of low interest rates because they had no income, but much debt.

    Some people consider this unfair! Doesn’t this cheat creditors?

    Can I File For Bankruptcy If Im Not A United States Citizen

    Yes. Itâs possible to file for bankruptcy if youâre not a U.S. citizen or donât have a visa or a green card. However, what you DO need to have is an ITIN or a social security number.

    What is an ITIN, you ask? It stands for: Individual Taxpayer Identification Number. Itâs a number issued by the Internal Revenue Service for tax purposes.

    People without social security numbers get issued an ITIN. Getting issued an ITIN does not indicate immigration status. For example, you can be an undocumented immigrant and get issued an ITIN to comply with U.S. tax laws.

    C Thumbnail Sketch Of The Us Systems: Debt Forgiveness For Both Individuals And Business

    The bankruptcy systems that have resulted from the history, politics, and culture discussed above are also unique. First and foremost, they allow each bankruptcy debtor a choice about whether to attempt to pay back creditors or to just give up and walk away from debt. This choice is generally not available in other parts of the world. Moreover, as discussed below, businesses that are reorganizing can continue to operate through a Chapter 11 reorganization proceeding that is not overseen by a court-appointed administrator.

    Bankruptcy And The Economy

    Ideally, the bankruptcy process should benefit the economy. Giving debtors a way to have their debts discharged theoretically encourages borrowing and spending. For consumers, this means using credit cards or mortgages to buy goods and make large purchases like homes or cars. For businesses, this means taking on more risk by investing in research and development and expanding. If debts could not be forgiven, there would be little incentive to take on debt or engage in relatively risky activity. Conversely, the bankruptcy process gives creditors an equitable means for collecting to the fullest extent possible on debts and repossessing collateral property.

    Has Lehman Collapse Influenced Politics

    How To Get Credit Cards After Bankruptcy To Qualify For ...

    But some suggest that the collapse of the titan of finance has also sparked a wave of Democratic socialism that has only intensified an anti-large-financial-institutions sentiment. 

    Still, despite claims that Lehman’s collapse has influenced leftist policy in the past 10 years, economic policy is not expected to be a central issue in the upcoming 2020 campaign, according to CNBC.

    However, although banks have made several strides toward greater risk management, the financial sector continues to leave a lot to be desired.

    “Ten years after Wall Street crashed the economy, you would think Washington would still be vigilant about risks to our economy and American families,” Sen. Sherrod Brown, the Senate Banking Committee’s ranking Democrat, told CNBC this week. “But at one agency after another, the rules are being rewritten to suit the special interests, raising the risk that taxpayers will once again be on the hook for Wall Street’s recklessness.” 

    So, has Wall Street learned its lesson? 

    Tags

    G When Law And Culture Clash: Debt And Suicide

    At a time when the Japanese government is doing everything it can to reduce the stigma associated with financial failure, Japanese consumers finally appear to be loosening up and spending more. The use of revolving consumer credit appears to be on the rise, which may help fuel the economy. It also may result in more financial failures for consumers, which could actually cause more social problems.

    Despite more consumer credit in the system, the Japanese have not relaxed their views on financial failure, for either businesses or consumers. Despite the huge amount of debt companies have taken out recently, stigma over a failed business is higher in Japan than virtually anywhere else in the world. Executives of failed companies in Japan often do more than disappear. Financial failure is the ultimate societal disgrace and suicide is a common way out. As higher consumer debt levels become more common, failures will increase and so may suicide rates. It is unclear whether merely liberalizing laws can stem this tide.

    What Is The Opposite Of Inflation

    But if the economy is in real trouble like it was in 2008 and now, then government spending money in the form of a stimulus plan is a necessity.

    The opposite of inflation is deflation.  Deflation is when prices spiral down and down. Deflation is a situation where households dont spend money today and it gets into a cycle this day after day. In times like now, when our jobs are so tenuous and weve seen a reduction in our paychecks, our natural tendency is to hoard it like weve been hoarding toilet paper.

    The more we are uncertain about tomorrow, the more we hoard cash and are unwilling to spend it. But it creates a vicious cycle because if we dont spend any money, then businesses cant make money and might go bankrupt. However, this potential bankruptcy makes us even more uncertain about tomorrow so we hoard even more.

    In the case of government spending, they are substituting our spending with theirs.  Because at this point, regular folks arent spending, the government isnt crowding anyone out.

    The Basis Of Our Economic System Stems From The Ability To Buy Goods And Services

    If your funds are tied up paying creditors and high-interest rates, you are unable to buy additional goods and services to help stimulate the economy.  By having debts discharged or significantly reduced, frees up money to put back into the economy which is actually more favorable than paying a few creditors with high-interest rates. 

    The inability to have debts forgivendoes not increase a debtors likelihood to pay their debts; however, the ability to discharge debts ultimately allows for more money to circulate and fuel the economy.  Additionally, most creditors realize that a percentage of the money they lend will not be repaid, and that is accounted for in their high interest rates. 

    Filing individual bankruptcy is only detrimental to the economy when it happens in mass, which typically stems from a recession and/or depression. While this has happened in recent history, our economy has seen an uptick in the last few years. 

    If your decision to file bankruptcyhas been halted because you are concerned that it will have an overall negative impact on the economy, you can rest easy.  Bottom line if you are drowning in debt and want to help the economy, it may be most beneficial all around if you actually file for bankruptcy.

    Ready to file?  Call us today at 757-276-6555 for a free consultation!

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    This Firm is a Debt Relief Agency. We assist individuals to become debt free through bankruptcy.

    The Lehman Brothers Collapse And How It’s Changed The Economy Today

    How stimulus money could affect the economy

    In one of the most massive bankruptcies in United States history, the Lehman Brothers collapse marks its 10-year anniversary in September 2018. The firm’s demise is nearly synonymous with the 2008 financial crisis, and the economy is still feeling the repercussions of its destruction. But, how did one of the largest investment banks meet its demise in such a catastrophic fashion? 

    The Rise In Us Consumerism

    The above discussion focuses primarily on the development of business and commerce and the resulting business debt. Current U.S. attitudes toward personal or consumer bankruptcy, however, developed far more recently, under circumstances no less unique. The United States was pulled out of the Great Depression by World War II, which created jobs for virtually everyone who was not in the armed forces. Due to rationing of most consumer products, and stopped production for others, most people saved their wages. After the war, the United States experienced a period of inflation, after which consumer demand for various household goods and services increased dramatically. Three things fueled these increases in demand: a pent-up desire for things that were unavailable during the war, large savings accounts, and the baby boom.

    U.S. policy at the time promoted spending to the fullest extent possible. As one consultant announced shortly after the war, the greatest challenge facing American business was convincing consumers that the hedonistic approach to life is a moral, not an immoral one. This strategy apparently worked well, as Americans began purchasing to be happy, and building social experiences around the act of acquiring.

    U.S. citizens with ready cash on hand began to believe that they needed these gadgets, that they were a sign of modernity and prosperity, and that buying them would fuel the economy. Thus, a consumer class was born.

    One Lesson Of The Great Depression Allowing Firms To Declare Bankruptcy Helped Save Companies

    Even legislators recognize that the $2 trillion stimulus passed by Congress wont be sufficient to sustain the American economy in the face of the coronavirus pandemic, already moving to pass an addition while talking about the next big step.

    One tool is receiving little attention but should be a big part of their plans: bankruptcy. Congress can prevent a long-lasting depression by making it simpler for businesses, large and small, incorporated and unincorporated, to petition to reorganize their debts in bankruptcy which automatically stops debt collection and can prevent what President Herbert Hoover called futile and destructive liquidation of businesses. If they were able to petition for protection in bankruptcy, businesses could remain intact, and workers could return to work when social distancing measures are lifted.

    But for this to be most effective, Congress must expand the definition of a small business to include companies with debts up to $10 million, up from the current $2.7 million. Lawmakers can also eliminate filing fees and reduce paperwork requirements so that a lawyers help is not necessary for an initial bankruptcy filing. The Small Business Administration can help by providing information about recent improvements to reorganization of debts in bankruptcy as part of its outreach regarding the stimuluss expansion of the small-business lending program, which may expand further in the coming weeks.

    The Business Of Credit: Making Money By Charging Interest

    The business of credit is much like investing the greater the risk, the greater the potential profits. Any creditor, if it wishes, can simply extend credit to only the most creditworthy individuals or businesses, especially those with significant assets, thereby greatly reducing losses. However, this market is much smaller. The competition for the most creditworthy individuals is keen. To get significant market share, a creditor would have to offer low interest rates, cash-back or other incentives, and other benefits that would cost the creditor, resulting in lower profits.

    Some people argue that bankruptcy raises prices for everyone. This simply isn’t true it only raises prices for the subprime market for the same reason that an investment must have a greater payoff if it has greater risk. If the subprime market was not profitable by itself, no one would extend credit to this market. Thus, the subprime market is not being subsidized by any other sector. The prime market, for instance, is not paying higher interest rates because of the subprime market otherwise some lenders would just cater to the prime market and outcompete those lenders serving both markets.

    How And Why We Spend It: Let Us Count The Ways

    How a Business Bankruptcy Attorney Can Help

    Consumer spending is considered one of the most important indicators of economic health in the U.S. economy. Despite the credit industrys claims that consumers are abusing credit, credit industry advertising encourages people to use as much credit as they can get, for every use imaginable or no particular use at all. Some advertisers rely on nostalgia to get people to borrow as much money as possible. For example, in a mailer for a home equity loan, United Pan Am Mortgage writes:

    emember the days when dad worked, mom managed the home, and there was still enough money for a house, cars, vacations . . . even college? Its sure not like that anymore. Today, with single parents or even with both parents working, its hard to make ends meet, let alone have some of the good things life offers. We think you deserve more and we can help. . . . A friendly phone call will get the ball rolling on putting a lump sum in your pocket. Thats righthave the extra cash to make those home improvements youve been putting off, take that vacation youve been dreaming about, give yourself peace of mind, knowing your son or daughters tuition is covered.

    The advertisement goes on to tell the recipient whom to call to get a home equity loan to solve all of lifes problems, demonstrating that, despite popular belief, you can buy both happiness and peace of mind.

    I Bankruptcy In The United States: History Attitudes And Law

    This Section outlines the history of the United States growth economy and the unique entrepreneurial spirit that led to an equally unique bankruptcy system for both businesses and consumers. It also discusses the development of consumer and credit culture and the laws that have developed from these unique quirks of history.

    The Rationale And Political Milieu Of Early Us Bankruptcy Law

    While credit was seen as necessary, it also had its hazards. Where there is credit, there is also default, and the use of credit unquestionably made early U.S. citizens vulnerable to the shifting currents of the overall economy, and intricately tied them to the financial health of the firms with which they did business. This may explain why many early market capitalists in the United States favored a systematic and forgiving bankruptcy system to address the issue of default. Ironically, a system of distributing a debtors available assets and discharging his or her remaining debts was ultimately seen as a characteristic of economic modernity, the result of the complex development to which modern society has attained.

    People took risks, and the bankruptcy system facilitated this risk by design. The drive to be self-employed, and thus to be successful in business, caused a great deal of financial failure in the mid-1800s. The economy was friendly to any capitalist effort, as the goal was to create a vibrant market economy as quickly as possible. As young men tried their luck at business, many learned about success, as well as failure, in the pursuit. Interestingly, early bankruptcy merchants included women as well as men, indicating that women participated in the marketplace even as early as the 1700s.

    Whats Next For Our Economy

    Unlike what happened in 2008, which we are all still scarred by, this time, we are facing an economic emergency along with a health emergency.  That is not to say that everything we throw all we have learned from the past out the window.

    First is that we have to receive the checks from the Stimulus/Relief package.  This is the first step in creating more demand.  Once people have money in their hands, they can go to grocery stores to buy food and household necessities.

    Corporations will get help in the form of wage subsidies or loans so they can continue to employ their workers.

    But most importantly and this is tied closely with economic recovery, we have to have a COVID-19 recovery.  We have to see the number of cases of new infections plateau and decrease.  With having a better handle on containing the health threat, we can better plan our economic response, either nationwide or at our household level.

    That is what we are on the lookout for.

    Advantages And Disadvantages Of Bankruptcy

    Peter Schiff On The Economy And Bankruptcy

    Declaring bankruptcy can help relieve you of your legal obligation to pay your debts and save your home, business, or ability to function financially, depending on which kind of bankruptcy petition you file. But it also can lower your credit rating, making it more difficult to get a loan, mortgage, or credit card, or to buy a home or business, or rent an apartment.

    If you’re trying to decide whether you should file for bankruptcy, your credit is probably already damaged. But it’s worth noting that a Chapter 7 filing will stay on your for 10 years, while a Chapter 13 will remain there for seven. Any creditors or lenders you apply to for new debt will see the discharge on your report, which can prevent you from getting any credit.

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