Group 2:

Leader:
Jasmine Sigaseg
Members:
Rutchelyn Bulac
Caminos Anjoy
Joyce Ricaberte
Mery Claire Abrasaldo
 TABLE OF CONTENTS

Introduction 1

Cause and Impact 2

Variables 3

Causal Loop 4

Conclusion 9

References 10

Documentation 11
 1

INTRODUCTION

What do we do with people and businesses that are unable to pay all of their debts?
Should they be forced to lie in bed that they have made, or should government policy offer them
some of relief? What scope and nature of relief might be appropriate? Should we offer relief
freely, or only in return for a significant sacrifice of some kind? These are questions with which
policy makers have struggled since the very beginning.

What is bankruptcy?

Is a legal process through which people or other entities who cannot repay debts to
creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is
imposed by a court order, often initiated by the debtor. Bankruptcy is a method by which some
control can be taken over a debtor’s affairs, so that the entire financial disaster can be brought to
an end and the debtor can make a fresh start. It is often described as a last resort for people who
are unable to pay their debts—and rightly so. Although it is sometimes a person's only
alternative, bankruptcy has serious consequences that can follow them for years.
Furthermore, bankruptcy is a state in which an individual or a business unit is declared
financially incapable of taking care of its activities. This is usually done to protect debtors and
creditors even as they carry out their business transactions. Bankruptcy to an individual means
that he or she could be having more debts than his income can manage (Media, 2005). For a
business unit, it is a state in which its operating expenses are much more than its income and
hence being able to effectively run the unit. Due to the risks that come with bankruptcy, the
government came up with a law that was at first meant to protect creditors and later on modified
to also protect debtors.
 2

Causes of Bankruptcy

Some of the major causes of bankruptcy are poor planning, lack of financing, lack of
business experience and lack of personal discipline. Anyone considering opening their own
business should have not only the vision of where the business is going to end up, but a strong
business plan.

Negative Impact of Bankruptcy

This is generally a sign of a large-scale problem in the economy, such as a depression or

recession. When there are large numbers of bankruptcies, then consumers and companies start
becoming more conscious about lending and spending beyond their means, which could stifle the
economy.
 3

25 Variables

• Personal issues
• Poor-decision making
• Natural disaster
• Decrease of income
• Medical expenses
• Loans
• Training
• Poor business plan
• Poor management
• Didn’t recognize or accept their weakness
• Overspending
• Scam
• Change your mindset
• Reduce costs and prioritize what you pay
• Mange your cash flow
• Good decision-making
• Investments
• Sell off unnecessary assets
• Ask for professional advices
• Creating new business plan
• Increase income
• Keeping accurate financial reports
• Setting Financial goals
• Understand your target market
• Organize your business
 4

CAUSAL LOOP

Bankruptcy

Increase Income Personal Issues

Investment Poor Decision-making

Trainings Decrease of Income

Bankruptcy will increase if personal issues also increases, such as negative rumors about the
company's employees, which leads to poor decision-making. As an owner of the company, since
his/her decision for the company is not competitive enough, its income may decrease. Then the
owner realized that since the company's income decreases, the owner re-enrolled for business
trainings. Since the owner have more knowledge on how to grow business, the owner invested
new business again. In a few months of investing, the company's income slowly increased
(income increases). Since the company's income already increased the chance of bankruptcy
decreases.
 5

Bankruptcy

Setting financial
Poor business plan
goals

Ask for
professional Loans
advices

Bankruptcy will increase if the company has poor business plan. And because he/she
implemented a poor business plan the possibility of having loans will be increases too with that
loan he/she think that it might help the business to survive. Moreover, after having loans he/she
thought or realizes to ask for professional advices so he/she can learn from it and for that his/her
business can continue. Afterwards, he/she thought that he should set his financial goals so that
there is no chance of bankruptcy.
 6

Bankruptcy

Poor decision
Change mindset
making

Ask for Didn't recognize

professional or accept their
advices weakness

Bankruptcy will increase if poor decision making will also increase. As an owner, because of
poor decision making he/she didn't recognize or accept his/her weaknesses. Since he/she realize
that not accepting its weakness for their company is not good, he/she realize to ask for
professional advices. Then after asking advices he/she changes his/her mindset for the
good/success of his/her company. Since the owner changes its mindset, bankruptcy will be
avoided.
 7

Bankruptcy

Manage your cash flow

Scam

Loss of income
Investment

Create new plan

If you are the owner of the company and you don't know how to manage your money well then there is
possible of bankruptcy and because of that you lose your source of income but you realized that you cannot
afford to lose your company so you create a new plan so in order to increase your source of income you
invest but you got scam and because of that there is tendency of bankruptcy.
 8

Bankruptcy

Increase income Setting financial goals

Reorganize the
Loss income
business

Training Loans

Bankruptcy will increase if the financial goals are not clear and set, and because of it your loss
of income will increase. So, the owner of the company realize that he/ she needs to loan in
order to recover the income that he/ she loss and because of that his/her loan will increases.
Then, he/ she realize that the loan is not the only way to recover the loss of the company, so
he/ she undergo training to learn more about how to handle a business. After a month, he/ she
reorganize his/her business. Therefore, the income of his/ her business will increase, so there
is a chance that your company will not lead to bankruptcy.
 9

CONCLUSION
In conclusion, bankruptcy represents a legal process that aims to provide individuals or
businesses with a fresh start by addressing financial challenges. This conclusion involves the
discharge of eligible debts, allowing for a renewed financial beginning, although the specific
details may vary based on the type of bankruptcy and individual circumstances. Seeking
professional guidance is advised for a successful resolution. There are several measures that can
help companies avoid bankruptcy keeping accurate records and acting fast at the first signs of
financial trouble is one way to keep bankruptcy at by Maintaining a Cash-Flow Balance, Making
Decisions Based on a Business Plan, Keeping Accurate Financial Reports, Maintaining Good
Relationships with Creditors and lastly, Reaching Out to Financial and Legal Professionals.
However, bankruptcy may lead to unfavorable outcomes. It negatively impacts a debtor’s
credit history and impacts an individual or business’s ability to obtain a loan or build up assets
again. Businesses also run the risk of liquidation and business closure, even if the intention of
initiating bankruptcy was to reorganize. Before filing for bankruptcy, a businesses and
individuals should carefully consider and examine all options to see if there are better
alternatives available to manage and pay off their debt.
 10

REFERENCES
https://en.wikipedia.org/wiki/Bankruptcy
https://www.investopedia.com/articles/pf/08/avoid-bankruptcy.asp
Dunscomb, S. (1969). Bankruptcy: a study in comparative legislation. Virginia: AMS Press.
Elias, S. et al. (2009). How to File for Chapter 7 Bankruptcy. New York: No.
Media, S. (2005). Bankruptcy: An Action Plan For Renewal. California: Socrates Media, LLC.
https://www.ksnpc.com/blog/key-measures-to-prevent-bankruptcy/?
fbclid=IwAR3qjJN6rfmheR9PeqzLL9W1DYzYSEiBJf0psTwKkQ1p6gwBS6JTXXds4Zs
https://ecampusontario.pressbooks.pub/buslawandethicscanada/chapter/concluding-thoughts-5/
#:~:text=A%20fundamental%20goal%20of%20bankruptcy,collection%20actions%20against
%20the%20debtor.
http://beyondeconomy.pbworks.com/w/page/42232915/FrontPage?
fbclid=IwAR1LRfdlT6BzZlfzXB3zv-5GiRBvOuBjngb9bxBaU-GJ51cuG_bdZ7EwXIo
https://www.brentgeorgelaw.com/?
fbclid=IwAR0uhrS0djWMGO0NQIlqO594oUjrQ7Nwk0SxfT4pSqDCaWi-dkwQ8SEOkr4
 11

DOCUMENTATION