First introduced in 1911, group life insurance has grown since World War II chiefly because it has been included as a fringe benefit in collective-bargaining agreements. It provides a means of insuring a number of people in a business establishment, society, or other organization. A master contract is issued, and each insured person receives a certificate specifying the amount of the insurance and his or her beneficiary. Group policies contain a conversion clause that permits an insured, on separation from the group, to convert to an individual type of nonterm life insurance policy without evidence of insurability. The new policy, however, is issued at the premium rate applicable at the attained age of the policyholder. Because group insurance is a form of wholesale buying, its economies are passed on to policyholders in the form of lower premiums per dollar of coverage. Group life insurance usually is issued on a 1-year renewable term basis.
Friday, August 14, 2009
Savings Bank Life Insurance
First made available in Massachusetts in 1907, savings bank life insurance is transacted on an over-the-counter basis or by mail without the use of soliciting agents. This normally results in reduced expense and lower costs to policyholders.
The technical details of administering the business are performed by a central organization that provides actuarial, medical, and certain other services for the member banks. The central organization computes the premium rates and prepares policy forms and application blanks. Each participating bank, however, is an independent body that issues its own contracts, maintains records, and retains and invests the assets of its own insurance department. The surplus funds attributable to insurance operations of the bank are available only to its policyholders; moreover, the central organization maintains a contingency or guaranty fund to protect policyholders.
The technical details of administering the business are performed by a central organization that provides actuarial, medical, and certain other services for the member banks. The central organization computes the premium rates and prepares policy forms and application blanks. Each participating bank, however, is an independent body that issues its own contracts, maintains records, and retains and invests the assets of its own insurance department. The surplus funds attributable to insurance operations of the bank are available only to its policyholders; moreover, the central organization maintains a contingency or guaranty fund to protect policyholders.
Government Life Insurance
The U.S. government, through the Department of Veterans Affairs (formerly the Veterans Administration), administers insurance programs for active members of the armed forces and veterans of military service. Instituted under the terms of the War Risk Insurance Act of 1917, U.S. Government Life Insurance permitted those on active duty during World War I to purchase low-cost life insurance in amounts up to $10,000. About 4.5 million persons applied for this insurance during the war. National Service Life Insurance, instituted in 1940, provided insurance for members of the armed forces in World War II on the same basis as had existed in World War I. This program was later extended to include World War II veterans, who were eligible for insurance whether or not they had obtained policies while in service. No new policies were issued under either program after April 1951.
Legislation enacted in 1965 established Servicemen's Group Life Insurance (SGLI) for personnel on active duty in the uniformed services and Ready Reservists. This program is currently in effect. Under the present program up to $50,000 of group life insurance is available on a voluntary basis to each individual, including all reservists and members of the National Guard. SGLI, now supervised by the Department of Veterans Affairs, is underwritten by more than 300 life insurance companies. A program begun in 1974 provides for automatic conversion of SGLI to a 5-year nonrenewable policy known as Veteran's Group Life Insurance (VGLI). Coverage is available in units of $5000 up to the amount of SGLI in force at the time of separation. VGLI is available to service personnel separated on or after August 1, 1974, and to reservists injured while on active duty. At the termination of the 5-year policy the insurance policy can be converted to an individual commercial policy with the participating companies at standard rates regardless of the policyholder's health.
Veterans Mortgage Life Insurance is available to totally disabled veterans, primarily paraplegics, who receive a grant to purchase specially adapted housing. In 1976 the amount of insurance coverage was increased to $40,000.
Legislation enacted in 1965 established Servicemen's Group Life Insurance (SGLI) for personnel on active duty in the uniformed services and Ready Reservists. This program is currently in effect. Under the present program up to $50,000 of group life insurance is available on a voluntary basis to each individual, including all reservists and members of the National Guard. SGLI, now supervised by the Department of Veterans Affairs, is underwritten by more than 300 life insurance companies. A program begun in 1974 provides for automatic conversion of SGLI to a 5-year nonrenewable policy known as Veteran's Group Life Insurance (VGLI). Coverage is available in units of $5000 up to the amount of SGLI in force at the time of separation. VGLI is available to service personnel separated on or after August 1, 1974, and to reservists injured while on active duty. At the termination of the 5-year policy the insurance policy can be converted to an individual commercial policy with the participating companies at standard rates regardless of the policyholder's health.
Veterans Mortgage Life Insurance is available to totally disabled veterans, primarily paraplegics, who receive a grant to purchase specially adapted housing. In 1976 the amount of insurance coverage was increased to $40,000.
Attorney
Attorney, in law, any person authorized by another to represent him or her. An agent who has been granted express authority to bind his or her principal is called an attorney in fact. Such authority is usually granted by a written instrument called a power of attorney. The powers conferred may be general, as when one gives another a mandate to manage all one's affairs during an absence, or special, as when the authority extends only to a particular business, or is otherwise limited or qualified. The term attorney at law is used in the United States to denote a legal adviser or representative in all manner of business. In Britain, upon the fusion of law and equity by the Judicature Act of 1873, the two classes of attorney and barrister were united under the name of solicitor in the High Court of Justice.
An attorney at law is an officer of the court, and as such is required, in the U.S., to take a binding oath of office to observe the U.S. Constitution and the constitution of the state of residence. Each state regulates by law the training and qualifications of attorneys. Usually a preliminary examination in general scholarship is required, followed by study at a school of law and sometimes by a clerkship or apprenticeship, varying from one to two years, in the office of a practicing attorney. Finally, an applicant must pass an examination in law before being admitted to the bar.
The duties of an attorney are to act with diligence and fidelity to one's client and to show average prudence, knowledge, and skill in professional dealings. In order to settle an action, the attorney requires, as a rule, the special authority of the client. No attorney can be compelled to reveal confidential information related by a client.
An attorney at law is an officer of the court, and as such is required, in the U.S., to take a binding oath of office to observe the U.S. Constitution and the constitution of the state of residence. Each state regulates by law the training and qualifications of attorneys. Usually a preliminary examination in general scholarship is required, followed by study at a school of law and sometimes by a clerkship or apprenticeship, varying from one to two years, in the office of a practicing attorney. Finally, an applicant must pass an examination in law before being admitted to the bar.
The duties of an attorney are to act with diligence and fidelity to one's client and to show average prudence, knowledge, and skill in professional dealings. In order to settle an action, the attorney requires, as a rule, the special authority of the client. No attorney can be compelled to reveal confidential information related by a client.
Advocate
Advocate, in a general sense, one who pleads for another in a court of law or other tribunal. In the United Kingdom, professional advocates are called barristers and are permitted to plead or argue cases before the High Court of Justice; a barrister is distinguished from a solicitor, who may conduct litigation only in inferior courts. The avocat and avoué in France are analogous to the barrister and solicitor in England. In the United States, most former British colonies, and some parts of Europe, the two branches of the legal profession are not separate.
In a narrower sense, the term advocate was formerly used in Britain to denote a member of the College of Advocates at Doctors' Commons (abolished in 1857). These advocates had the exclusive right to plead in the ecclesiastical and admiralty courts and took precedence over all ordinary barristers. In the U.S. Army, the judge advocate general is chief adviser to the army authorities in the administration of military law ( Military Courts).
Law, body of official rules and regulations, generally found in constitutions, legislation, judicial opinions, and the like, that is used to govern a society and to control the behavior of its members. The nature and functions of law have varied throughout history. In modern societies, some authorized body such as a legislature or a court makes the law. It is backed by the coercive power of the state, which enforces the law by means of appropriate penalties or remedies.
Formal legal rules and actions are usually distinguished from other means of social control and guides for behavior such as mores, morality, public opinion, and custom or tradition. Of course, a lawmaker may respond to public opinion or other pressures, and a formal law may prohibit what is morally unacceptable.
Law serves a variety of functions. Laws against crimes, for example, help to maintain a peaceful, orderly, relatively stable society. Courts contribute to social stability by resolving disputes in a civilized fashion. Property and contract laws facilitate business activities and private planning. Laws limiting the powers of government help to provide some degree of freedom that would not otherwise be possible. Law has also been used as a mechanism for social change; for instance, at various times laws have been passed to inhibit social discrimination and to improve the quality of individual life in matters of health, education, and welfare.
Some experts believe the popular view of law overemphasizes its formal, coercive aspects. They point out that if a custom or norm is assured of judicial backing, it is, for practical purposes, law. On the other hand, a statute that is neither obeyed nor enforced is empty law. Social attitudes toward the formal law are a significant part of the law in process. The role of law in China and Japan, for example, is somewhat different from its role in Western nations. Respect for the processes of law is low, at least outside matters of business and industry. Tradition looms much larger in everyday life. Resort to legal resolution of a dispute is truly a last resort, with conciliation being the mechanism that is preferred for social control.
Law is not completely a matter of human enactment; it also includes natural law. The best-known version of this view, that God's law is supreme, has had considerable influence in the United States and other Western societies. The civil rights movement, for example, was at least partially inspired by the belief in natural law. Such a belief seems implicit in the view that law should serve to promote human dignity, as for instance by the enforcement of equal rights for all. Muslim societies also embrace a kind of natural law, which is closely linked to the religion of Islam.
In a narrower sense, the term advocate was formerly used in Britain to denote a member of the College of Advocates at Doctors' Commons (abolished in 1857). These advocates had the exclusive right to plead in the ecclesiastical and admiralty courts and took precedence over all ordinary barristers. In the U.S. Army, the judge advocate general is chief adviser to the army authorities in the administration of military law ( Military Courts).
Law, body of official rules and regulations, generally found in constitutions, legislation, judicial opinions, and the like, that is used to govern a society and to control the behavior of its members. The nature and functions of law have varied throughout history. In modern societies, some authorized body such as a legislature or a court makes the law. It is backed by the coercive power of the state, which enforces the law by means of appropriate penalties or remedies.
Formal legal rules and actions are usually distinguished from other means of social control and guides for behavior such as mores, morality, public opinion, and custom or tradition. Of course, a lawmaker may respond to public opinion or other pressures, and a formal law may prohibit what is morally unacceptable.
Law serves a variety of functions. Laws against crimes, for example, help to maintain a peaceful, orderly, relatively stable society. Courts contribute to social stability by resolving disputes in a civilized fashion. Property and contract laws facilitate business activities and private planning. Laws limiting the powers of government help to provide some degree of freedom that would not otherwise be possible. Law has also been used as a mechanism for social change; for instance, at various times laws have been passed to inhibit social discrimination and to improve the quality of individual life in matters of health, education, and welfare.
Some experts believe the popular view of law overemphasizes its formal, coercive aspects. They point out that if a custom or norm is assured of judicial backing, it is, for practical purposes, law. On the other hand, a statute that is neither obeyed nor enforced is empty law. Social attitudes toward the formal law are a significant part of the law in process. The role of law in China and Japan, for example, is somewhat different from its role in Western nations. Respect for the processes of law is low, at least outside matters of business and industry. Tradition looms much larger in everyday life. Resort to legal resolution of a dispute is truly a last resort, with conciliation being the mechanism that is preferred for social control.
Law is not completely a matter of human enactment; it also includes natural law. The best-known version of this view, that God's law is supreme, has had considerable influence in the United States and other Western societies. The civil rights movement, for example, was at least partially inspired by the belief in natural law. Such a belief seems implicit in the view that law should serve to promote human dignity, as for instance by the enforcement of equal rights for all. Muslim societies also embrace a kind of natural law, which is closely linked to the religion of Islam.
PUBLIC LAW
Public law concerns the relationships within government and those between governments and individuals. Because the Roman codes were almost entirely limited to the private area, public law is usually not codified. In civil-law countries, separate administrative courts adjudicate claims and disputes between the various branches of government and citizens, and many lawyers specialize in public law. In France, Germany, and Italy, still other courts handle constitutional issues.
Public law is not quite so clearly demarcated in the United Kingdom and the U.S. Under the common-law approach the same courts handle public and private litigation. Because the United Kingdom has no written constitution, basic principles pertaining to government powers and limits and to fundamental individual rights are found in acts of Parliament, judicial opinions, and tradition. The U.S., on the other hand, has a distinct body of constitutional law.
The development of administrative law is a comparatively recent occurrence. Numerous federal and state administrative agencies now make rules that reach into all manner of activities, including licensing, regulation of trades and professions, protection of health, and promotion of welfare. Their powers emanate from legislation, and their rules are reviewable by the courts.
U.S. constitutional law is the most extensive and pervasive of any country in the world. It is embodied in the Constitution and in the opinions of the U.S. Supreme Court rendered over time. Through its power of judicial review, the Supreme Court may invalidate any legislation or other governmental actions that it finds to be in violation of the Constitution. Constitutional courts in some civil-law countries have similar powers. In the United Kingdom no equivalent judicial power exists, and Parliament is supreme. In totalitarian nations, constitutional limits on legislative power are generally a matter of political determination.
The U.S. Constitution allocates power within the federal government and between the federal and state governments. The first ten amendments (the Bill of Rights) and subsequent amendments define fundamental individual rights by placing limits on the powers of government at all levels. Through its powers of judicial review and interpretation, the Supreme Court has played a remarkable role in facilitating the growth of national power and influence by means of decisions about acts of Congress and federal administrative law. The Court has, for the most part, acted extensively to invalidate and inhibit discriminatory legislation and to adjust the relative distribution of government-connected services and revenue so as to ultimately provide for more democratic social relations. The Court, however, is frequently the center of much controversy because of widely varying interpretations about its role and the nature of constitutional law.
Laws concerning taxation and the regulation of business are in the public area, as is criminal law, which involves the exercise of governmental power by way of enforcement and punishment. Historically, criminal law in Britain included crimes defined by the courts. In the U.S. crimes are defined by statute, thus satisfying constitutional notions of due process. The public-law nature of the area is further emphasized by other constitutional protections such as the right of the accused to remain silent and the right to effective counsel. Criminal law not only promotes security and order but also reinforces moral norms. Debate has been continuous regarding the legitimacy of government intervention in areas where moral attitudes are in significant conflict, such as in matters of sexual practices, pornography, birth control, and euthanasia.
Public law is not quite so clearly demarcated in the United Kingdom and the U.S. Under the common-law approach the same courts handle public and private litigation. Because the United Kingdom has no written constitution, basic principles pertaining to government powers and limits and to fundamental individual rights are found in acts of Parliament, judicial opinions, and tradition. The U.S., on the other hand, has a distinct body of constitutional law.
The development of administrative law is a comparatively recent occurrence. Numerous federal and state administrative agencies now make rules that reach into all manner of activities, including licensing, regulation of trades and professions, protection of health, and promotion of welfare. Their powers emanate from legislation, and their rules are reviewable by the courts.
U.S. constitutional law is the most extensive and pervasive of any country in the world. It is embodied in the Constitution and in the opinions of the U.S. Supreme Court rendered over time. Through its power of judicial review, the Supreme Court may invalidate any legislation or other governmental actions that it finds to be in violation of the Constitution. Constitutional courts in some civil-law countries have similar powers. In the United Kingdom no equivalent judicial power exists, and Parliament is supreme. In totalitarian nations, constitutional limits on legislative power are generally a matter of political determination.
The U.S. Constitution allocates power within the federal government and between the federal and state governments. The first ten amendments (the Bill of Rights) and subsequent amendments define fundamental individual rights by placing limits on the powers of government at all levels. Through its powers of judicial review and interpretation, the Supreme Court has played a remarkable role in facilitating the growth of national power and influence by means of decisions about acts of Congress and federal administrative law. The Court has, for the most part, acted extensively to invalidate and inhibit discriminatory legislation and to adjust the relative distribution of government-connected services and revenue so as to ultimately provide for more democratic social relations. The Court, however, is frequently the center of much controversy because of widely varying interpretations about its role and the nature of constitutional law.
Laws concerning taxation and the regulation of business are in the public area, as is criminal law, which involves the exercise of governmental power by way of enforcement and punishment. Historically, criminal law in Britain included crimes defined by the courts. In the U.S. crimes are defined by statute, thus satisfying constitutional notions of due process. The public-law nature of the area is further emphasized by other constitutional protections such as the right of the accused to remain silent and the right to effective counsel. Criminal law not only promotes security and order but also reinforces moral norms. Debate has been continuous regarding the legitimacy of government intervention in areas where moral attitudes are in significant conflict, such as in matters of sexual practices, pornography, birth control, and euthanasia.
PRIVATE LAW
Private law involves the various relationships that people have with one another and the rules that determine their legal rights and duties among themselves. The area is concerned with rules and principles pertaining to private ownership and use of property, contracts between individuals, family relationships, and redress by way of compensation for harm inflicted on one person by another. Historically, government involvement was usually minimal. Private law has also operated to provide general guidelines and security in private arrangements and interactions in ways that are complementary to morality and custom but that are not necessarily enforceable in a court of law, such as noncontractual promises and agreements within an association of private individuals.
The relative significance of purely private law has decreased in modern times. Public law dominates in government-controlled societies; democratic societies increasingly have a mix of public and private law. The private sphere includes individuals and a vast array of groups, associations, organizations, and special legal entities such as corporations. They compete with one another and with government for control of resources, wealth, power, and the communication of ideas and values. Special fields of law, such as labor law, facilitate and control this competition. Much of such law is in the commercial and corporate areas. The formerly purely private law of property and contracts, for example, is now overlaid with legislation, regulations, and judicial decisions reflecting the competition. The public law of taxation has significant impact on the whole private sphere. Courts have increasingly regarded resolution of seemingly private disputes as vehicles for response to changing social conditions and values—especially in the U.S. Thus, manufacturers have experienced an expansion of liability for physical injuries caused by defects in their products. The mechanism of insurance allows manufacturers to spread such costs across the general consuming public.
The relative significance of purely private law has decreased in modern times. Public law dominates in government-controlled societies; democratic societies increasingly have a mix of public and private law. The private sphere includes individuals and a vast array of groups, associations, organizations, and special legal entities such as corporations. They compete with one another and with government for control of resources, wealth, power, and the communication of ideas and values. Special fields of law, such as labor law, facilitate and control this competition. Much of such law is in the commercial and corporate areas. The formerly purely private law of property and contracts, for example, is now overlaid with legislation, regulations, and judicial decisions reflecting the competition. The public law of taxation has significant impact on the whole private sphere. Courts have increasingly regarded resolution of seemingly private disputes as vehicles for response to changing social conditions and values—especially in the U.S. Thus, manufacturers have experienced an expansion of liability for physical injuries caused by defects in their products. The mechanism of insurance allows manufacturers to spread such costs across the general consuming public.
INTERNATIONAL LAW
The legal process that concerns relations among nations is called international law. Belief and experience in some form of international law dates from at least the days of the Roman Empire. Such law differs greatly from national legal systems. No court has the authority or power to give judgments backed by coercive sanctions. Even in its most modern developments, international law is almost wholly based on custom. The precedents on which it rests are the acts of independent governments in their relations with one another, including treaties and conventions. Behind many of its rules is only a moral sanction: the public opinion of the civilized world. When treaties or conventions are involved, however, machinery to enforce them exists—either an arbitration or conciliation procedure or the submission of the dispute to a regional or international court.
A discernible body of rules and principles is observed or at least acknowledged in international relations. These rules concern such matters as territorial titles and boundaries, use of the high seas, limits on war, telecommunication, diplomatic and consular exchange, and use of air space. The major sources of international law on these matters are multilateral treaties, international custom, and such general principles as are recognized by civilized nations.
The United Nations is one of the primary mechanisms that articulate and create international law. The General Assembly and other agencies of the UN bring a combination of diplomacy, negotiation, and propaganda to bear on world affairs in ways that produce effective international treaties and affect world opinion. Certain courts also have indirect impact, including the International Court of Justice. Domestic courts in various nations at times also engage in the articulation of international law.
A discernible body of rules and principles is observed or at least acknowledged in international relations. These rules concern such matters as territorial titles and boundaries, use of the high seas, limits on war, telecommunication, diplomatic and consular exchange, and use of air space. The major sources of international law on these matters are multilateral treaties, international custom, and such general principles as are recognized by civilized nations.
The United Nations is one of the primary mechanisms that articulate and create international law. The General Assembly and other agencies of the UN bring a combination of diplomacy, negotiation, and propaganda to bear on world affairs in ways that produce effective international treaties and affect world opinion. Certain courts also have indirect impact, including the International Court of Justice. Domestic courts in various nations at times also engage in the articulation of international law.
Credit Card
Credit Card, card that identifies its owner as one who is entitled to credit when purchasing goods or services from certain establishments. Credit cards originated in the United States in the 1930s; their use was wide-spread by the 1950s. They are issued by many businesses serving the consumer, such as oil companies, retail stores and chain stores, restaurants, hotels, airlines, car rental agencies and banks. Some credit cards are honored in a single store, but others are general-purpose cards, for use in a wide variety of establishments. Bank credit cards, now also in use in Europe, are examples of the general purpose card. Establishments dispensing almost every form of product or service are honoring such cards, and it is predicted that credit cards might some day eliminate the need for carrying cash.
When a credit card is used, the retailer records the name and account number of the purchaser and the amount of the sale, and forwards this record to the credit card billing office. At intervals, usually monthly, the billing office sends a statement to the cardholder listing all the charged purchases and requesting payment immediately or in installments. The billing office reimburses the retailer directly.
Most of the work involved in credit card operations is now handled by computers. Charges for the use of a credit card are sometimes paid directly by the cardholder, and sometimes borne by the retail establishments that accept them. In the latter case, the cost is absorbed into the price of the merchandise. Department stores usually charge interest to credit customers who do not settle their bills within a month, but certain credit plans do not charge interest until a bill has been outstanding for several months. Interest rates for overdue balances are regulated by state law. A continuing problem involved in the use of credit cards is the ease with which they can be used fraudulently if stolen or lost, although the liability of the owner is limited.
When a credit card is used, the retailer records the name and account number of the purchaser and the amount of the sale, and forwards this record to the credit card billing office. At intervals, usually monthly, the billing office sends a statement to the cardholder listing all the charged purchases and requesting payment immediately or in installments. The billing office reimburses the retailer directly.
Most of the work involved in credit card operations is now handled by computers. Charges for the use of a credit card are sometimes paid directly by the cardholder, and sometimes borne by the retail establishments that accept them. In the latter case, the cost is absorbed into the price of the merchandise. Department stores usually charge interest to credit customers who do not settle their bills within a month, but certain credit plans do not charge interest until a bill has been outstanding for several months. Interest rates for overdue balances are regulated by state law. A continuing problem involved in the use of credit cards is the ease with which they can be used fraudulently if stolen or lost, although the liability of the owner is limited.
Bankruptcy
Bankruptcy, legal proceeding in which a debtor declares his or her inability to pay consumer or business debts as they become due. Debtors may seek a discharge from continuing personal liability for unsecured debts or they may attempt to reorganize financially by seeking an extended period of time in which to pay all or a proportion of their indebtedness.
CURRENT PRACTICES
The U.S. Constitution empowers Congress “to establish ... uniform laws on the subject of bankruptcies throughout the United States” (Article I, Section 8). This grant of power to Congress has been interpreted to preclude the states from including effective individual bankruptcy discharges in their laws. The current federal bankruptcy legislation is the Bankruptcy Reform Act of 1978, as amended in 1984 and 1986.
More than 90 percent of bankruptcy proceedings are voluntary. They are initiated by the debtor, who files a petition with the appropriate federal court. A bankruptcy trustee then collects and liquidates the debtor's nonexempt property for the benefit of the unsecured creditors. Secured creditors are not affected by bankruptcy liquidations because they have taken collateral (such as a home mortgage) to ensure repayment of debts. Once distribution to unsecured creditors occurs, the court discharges the debtor unless that person's prior behavior justifies denying the discharge or granting it with certain specific statutory exceptions. In order to limit or deny the discharge, the creditor must prove that the debtor has obtained credit by fraudulent practices or has engaged in other prohibited behavior. Creditors can file an involuntary bankruptcy petition against a debtor, alleging that the debtor is “generally not paying” debts, but this type of proceeding rarely occurs.
The Bankruptcy Code allows both consumer and business debtors to attempt financial reorganization instead of liquidation of nonexempt assets. A debtor who selects this alternative proposes a reorganization plan for consideration by the affected creditors and the court. For individuals who use Chapter 13 reorganization proceedings, a typical plan requires payment from the debtor's future income. Businesses that wish to continue their operations, sometimes in a modified form, usually opt for Chapter 11 reorganization proceedings. Their proposals may combine payments from sales of some business assets with income from future business operations. Stockholder interests may be restructured in addition to modifying payment requirements for their secured and unsecured debts.
CURRENT PRACTICES
The U.S. Constitution empowers Congress “to establish ... uniform laws on the subject of bankruptcies throughout the United States” (Article I, Section 8). This grant of power to Congress has been interpreted to preclude the states from including effective individual bankruptcy discharges in their laws. The current federal bankruptcy legislation is the Bankruptcy Reform Act of 1978, as amended in 1984 and 1986.
More than 90 percent of bankruptcy proceedings are voluntary. They are initiated by the debtor, who files a petition with the appropriate federal court. A bankruptcy trustee then collects and liquidates the debtor's nonexempt property for the benefit of the unsecured creditors. Secured creditors are not affected by bankruptcy liquidations because they have taken collateral (such as a home mortgage) to ensure repayment of debts. Once distribution to unsecured creditors occurs, the court discharges the debtor unless that person's prior behavior justifies denying the discharge or granting it with certain specific statutory exceptions. In order to limit or deny the discharge, the creditor must prove that the debtor has obtained credit by fraudulent practices or has engaged in other prohibited behavior. Creditors can file an involuntary bankruptcy petition against a debtor, alleging that the debtor is “generally not paying” debts, but this type of proceeding rarely occurs.
The Bankruptcy Code allows both consumer and business debtors to attempt financial reorganization instead of liquidation of nonexempt assets. A debtor who selects this alternative proposes a reorganization plan for consideration by the affected creditors and the court. For individuals who use Chapter 13 reorganization proceedings, a typical plan requires payment from the debtor's future income. Businesses that wish to continue their operations, sometimes in a modified form, usually opt for Chapter 11 reorganization proceedings. Their proposals may combine payments from sales of some business assets with income from future business operations. Stockholder interests may be restructured in addition to modifying payment requirements for their secured and unsecured debts.
Bond (finance)
Bond (finance), interest-bearing certificate sold by corporations and governments to raise money for expansion or capital. An investor who purchases a bond is essentially loaning money to the bond's issuer in return for interest. The investor can hold the bond and collect interest payments or sell the bond to a third party.
HOW BONDS WORK
A bond's principal, or face value, represents the amount of the original loan that is to be repaid on the bond's maturity date. The interest that the issuer agrees to pay each year is known as the coupon, a term derived from the obsolete practice of attaching coupons that could be redeemed for interest payments to the bottom of the bond certificate. The interest rate, or coupon rate, multiplied by the principal of the bond provides the dollar amount of the coupon. For example, a bond with an 8 percent coupon rate and a principal of $1000 will pay annual interest of $80. In the United States the usual practice is for the issuer to pay the coupon in two semiannual installments.
HOW BONDS WORK
A bond's principal, or face value, represents the amount of the original loan that is to be repaid on the bond's maturity date. The interest that the issuer agrees to pay each year is known as the coupon, a term derived from the obsolete practice of attaching coupons that could be redeemed for interest payments to the bottom of the bond certificate. The interest rate, or coupon rate, multiplied by the principal of the bond provides the dollar amount of the coupon. For example, a bond with an 8 percent coupon rate and a principal of $1000 will pay annual interest of $80. In the United States the usual practice is for the issuer to pay the coupon in two semiannual installments.
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