Matthew opens a high-end clothing store, borrows funds to rent space and buy inventory, but fails to pay back his creditors. Two years later they seek to force him into Chapter 7 bankruptcy through.

Question

Anne Schaefer

Social Studies

26 May, 08:08

Matthew opens a high-end clothing store, borrows funds to rent space and buy inventory, but fails to pay back his creditors. Two years later they seek to force him into Chapter 7 bankruptcy through.

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Answers (1)

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Marcos Wu · Answer 1

Two years later, the lenders seek to force him into bankruptcy through involuntary bankruptcy.

Explanation:

In order to derive the principal amount lent by a lender to a business that has now become incapable of returning the amount, the lender can request the concerned governmental authority to declare the business as bankrupt. This can be done without the consent of the owner of the business who has borrowed money from the lenders. In such a case, the government assists the borrower to return the money of the lenders which is why the lenders try to involuntarily declare the business as bankrupt.