Bankruptcy is the condition of an individual or an organization which is characterized with the disability of paying taxes and debts and credits to the creditors and the state budget. Bankruptcy is a serious problem which influences the financial background of an individual, as it is evident, that without money one can not survive in the modern world. The term ‘bankruptcy’ originates from Latin ‘bancus’ and ‘ruptus’. The first banks were located in the public places and the moneylenders lent money to the people who required it there. Every lender was working at his own bench or a bank on the market and when he bankrupted, he broke the bank and showed that he was no longer able to lend money. Bankruptcy can occur because of the effect of different factors. Speaking about an individual, one can bankrupt because of unemployment and finance problems, which are related with it. When the person is not able to pay taxes, she is called a bankrupt.
The situation with companies is more difficult, because there are two scenario of bankruptcy. First of all, the company bankrupts when the business is not successful and the expectations concerning its development failed. In this case the company can not pay taxes and return money to the creditors and shareholders and bankrupts. The second variant is the bankruptcy on purpose or the bankruptcy fraud. The company can destroy the documents which describe the whole picture of its work, make false declarations and alter the real condition of business with the purpose to be called a bankrupt and not to pay taxes. Such an action is considered to be a serious federal crime and is strictly punished.
Bankruptcy is a serious problem for an individual and a company and even for the economics of the whole country if the bankrupted company was an influential one and paid taxes into the state budget. In order to analyze the topic of bankruptcy the student should collect information about the phenomenon and touch upon it every essential side. One should pay attention to the cause and effect of bankruptcy and suggest the most appropriate methods which can be helpful for the prevention of this problem. Finally, one should conclude the paper well and define the relevance of the topic and its effect on economics.
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