Chapter Thirteen

The ability to operate a business or household depends on the flow of money available. Businesses rely on the availability of cash flow to operate and continue daily functions. Unforeseen circumstances arise regularly in a household that may require the need for quick cash. Our financial system gives businesses and families options that can satisfy these needs.
Negotiable instruments give businesses and people the ability to pay others without using cash. Some negotiable instruments include drafts, checks, notes, and certificates of deposit. Sometimes businesses and individuals need to use credit to have funds available for these needs. Money given as credit generally requires a security. The purchase is usually enough collateral to satisfy this need. This is why lending institutions want a down payment on a purchase. If the ability to repay a debt is not there, the lending institution can go after the collateral (repossession) to receive there loan moey back. Another way to guarantee a return on the loan is a co-signer or surety. This is a third party that signs a loan to help the borrower receive a loan. If the original borrower cannot repay the loan, the surety will need to come up with the funds.
The last resort in a lending institution receiving money that the debtor is unable to repay is bankruptcy. Chapter 7, Chapter 11, and Chapter 13 all have wording that can be utilized by the debtor depending on the situation. The bankruptcy court decides the process and options that the debtor will take in the bankruptcy proceedings. While there are many bankruptcy filings each year, this is used when no other options exist. Bankruptcy may mean the refinance of or liquidation of debts. This need is important because of the unknown. Some debtors are put into bankruptcy because of irresponsibility, however, most are put there because of unforeseen circumstances. Businesses may feel a downturn in sales because of the economy, and households may experience loss of income or medical problems that arise to make it impossible for them to repay their loans. Living or operating within ones means is financial responsibility and could help prevent these proceedings.