Credit problems aren't just for consumers
Filed under: Borrowing, Recession
I'm sure it comes as no surprise to you that individual consumers aren't the only ones having money problems these days. Businesses are struggling too, and it's showing in the bankruptcy numbers. One website reports that so far this year, 24 public companies have filed for bankruptcy protection, which is more than 60% higher than the same periods in 2006 and 2007.What happens when the companies go into bankruptcy? Hopefully they are just looking for a little more time to pay their bills, and creditors eventually get the money that's owed to them. Most times, it doesn't go that way, though. The creditors race to get in line to see who is going to get paid and who is not. The creditors almost always lose at least some part of the money that's owed to them.
Why do you care? When a person or a company ditches out on the debt they owe, we all pay the price. Someone's got to make up the difference, and we will see increased prices for goods and services and higher interest rates for our financing. And issues with borrowers can impact markets around the world, as we have seen with subprime mortgage problems.
Not to mention the fact that the shareholders in the public companies filing for bankruptcy usually lose their investments. The effects of bankruptcy, especially corporate bankruptcy, are wide-reaching, and that's why consumers should care about the issue.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
College student in need of a credit card? Look no further!
How much is your mom worth?
Fantastic Freebies: 'clinique happy.' perfume spray
Reader Comments (Page 1 of 1)
3-25-2008 @ 10:38PM
DIANE said...
Be very Wary of Notices sent to your e-mail address that says you have to up date your information on your bank account. I kept getting these that really appear to be from Bank of America. Now listen up to this next! Bank Of America did not care and said oh, just delete it. I never even have had an account with B if A., but I decided to report it anyway. They said they did not have a fraud unit. I called 7 different Bank of America Branches. This even gets more alarning...I decided to find the path that it was sent to me from. I put that in the address bar......OH MY God! what came up next will make hair raise on your sping. It was a page in Arabic writing and a picture of a place that appeared a cave in the side of a mountain. Then it had two aribic e-mail address's. I clicked on one and it led me to another Aribic page. PEOPLE i CALLED THE FBI AND THE CIA NEXT... THE CIA HAS A PAGE OF ARIBIC WRITING FOR SCAMS. THIS IS TO INFORM US. BUT I think this is stealing money from our accounts and laundeing for terrorist organizations. THE B OF A PAGE LOOKED LEGIT AND HAD AN 800 PHONE NUMBER THAT ASKED FOR THE SAME INFORMATION FROM THE WEB PAGE THAT WAS FAKE. I pulled up the correct web B ofA page and you have to look close but you can see a differance. BEWARE!
Reply
3-30-2008 @ 1:09PM
quixtarisacult said...
Tracy...
I find a major difference in the way an individual and a corporation fares in these solvency problems. Individuals face their crisis basically alone. Unless they are in a position to refinance, or otherwise find a wealthy uncle to bail them out, bankruptcy is final.
For folks like Bear Stearns, the tax payers steps up and makes a bail out, or another bank steps in with a pennies on the dollar buyout bid.
I sincerely doubt, even with all the promises politicians make, that any real help is coming to people behind on their mortgages.
We are seeing the end result of several decades of deregulation of the banking industry, and the tax payers may have to come to the rescue of the very same greedy folk they've been victimized by during the so called housing boom. The housing boom has become the housing bomb. A pox on their houses!
Reply