Bankruptcy and Non-recourse Loans
The primary mechanism of debt relief in modern societies is bankruptcy, where a debtor who cannot or chooses not to pay their debts files for bankruptcy and renegotiates their debts, or a creditor initiates this. As part of debt restructuring, the terms of the debt are modified, which may involve the debt owed being reduced. In case the debtor chooses bankruptcy despite being able to service the debt, this is called strategic bankruptcy.
Certain debts can be defaulted on without a general bankruptcy; these are non-recourse loans, most notably mortgages in common law jurisdictions such as the United States. Choosing to default on such a loan despite being able to service it is called strategic default.
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Famous quotes containing the words bankruptcy and, bankruptcy and/or loans:
“Bankruptcy and repudiation are the springboards from which much of our civilization vaults and turns its somersets, but the savage stands on the unelastic plank of famine.”
—Henry David Thoreau (1817–1862)
“A woman’s whole life is a history of the affections. The heart is her world: it is there her ambition strives for empire; it is there her avarice seeks for hidden treasures. She sends forth her sympathies on adventure; she embarks her whole soul on the traffic of affection; and if shipwrecked, her case is hopeless—for it is a bankruptcy of the heart.”
—Washington Irving (1783–1859)
“The contented and economically comfortable have a very discriminating view of government. Nobody is ever indignant about bailing out failed banks and failed savings and loans associations.... But when taxes must be paid for the lower middle class and poor, the government assumes an aspect of wickedness.”
—John Kenneth Galbraith (b. 1908)