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Chapter 7? Chapter 11? What kind of book is this?

Friday, June 3rd, 2011

Lately, the economy’s troubles have people talking about Chapter 7 and Chapter 11 so often that you might think they’re part of a new bestseller. In fact, Chapter 7 and Chapter 11 are two different chapters of the U.S. Bankruptcy code. They explain two different ways you can file for bankruptcy.

If a company files for bankruptcy under Chapter 11 – “rehabilitation bankruptcy” – it tries to make some changes and then get running again. Basically, the company can’t ignore the money it owes creditors, but it can do things like negotiate a lower interest rate, making it easier to try to pay the money back. If it’s successful in Chapter 11, the company can keep working like usual.

But if there’s is no hope for a company to fix itself, it files for bankruptcy under Chapter 7 – “liquidation bankruptcy” – and the entire company is, well, liquidated, meaning that it is broken up into pieces and sold. A company that files for Chapter 7  is in such bad shape that they can’t do anything but sell their assets. The people who lent the bank money then wait in line to collect debts, based on when they loaned their money to the company in the first place.

From the business owner’s point of view, bankruptcy is a kind of chapter in a scary novel. (But hopefully not the final chapter.)

Liquidation is…

Friday, June 3rd, 2011

Liquidation is when a company sells all of its assets and goes out of business. Outstanding debts are paid and the remaining assets are redistributed to shareholders.

The European Union is…

Friday, June 3rd, 2011

The European Union is a political and economic organization made up of 27 countries in Europe. It’s not a country by itself, but in some ways it acts as a high-level governing organization for its member nations. Being part of the Union means that citizens, goods, and services are allowed to move freely between affiliated nations, without having to deal with things like visas or trade restrictions. Members of the EU also use the same currency, called the Euro.

Basically, being part of the European Union is like being in a club whose members are from all over Europe and who have decided that many of the same rules will govern every member – despite their differences in nationality. But not every European nation is a member of the EU (Switzerland, for example), and some member nations have not yet adopted the official currency (the United Kingdom still uses the Great British Pound).

A Layoff is…

Friday, June 3rd, 2011

A layoff is when an employee is either temporarily suspended or permanently fired from a job. Layoffs aren’t usually about employee performance, but rather a consequence of a company experiencing a financial crisis. The company may need to downsize, resulting in the elimination of certain jobs, in order to cut costs.

A Sponsor is…

Friday, June 3rd, 2011

A sponsor is something or someone that gives money to support an event, project, person or organization. Sponsoring can happen on a large scale (for example, Coca-Cola sponsoring the World Cup) or on a small scale (like if you ask your parents to sponsor a car wash for your soccer team). It just means that the sponsor gives resources (money or time) to help make something happen.

Sponsoring has two big advantages: it provides the resources needed to put on an event or maintain a team, and it allows the sponsor to plaster its name all over the event. It’s kind of like advertising, because you get your name in front of potential customers, and you get the priceless image of giving back to the community.

Precious Metals are…

Friday, June 3rd, 2011

Precious metals are metals that are rare and valuable. For example, gold, platinum, and silver are all precious metals.

A Whistleblower is…

Friday, June 3rd, 2011

A whistleblower is someone who finds out that a person or organization is doing something wrong and reports it to the authorities.

For example, if you’re working at a coffee shop, and you see your co-worker stealing from the cash register, telling your boss about it would make you a whistleblower. There are laws that say that you can’t be fired for being a whistleblower – so even if you get someone really important (like your boss) in trouble, they can’t fire you for telling the truth.

An Investment Vehicle is…

Friday, June 3rd, 2011

An investment vehicle is basically any structure or place where you put your money to try to make more money. Some examples of investment vehicles are stocks, bonds, and mutual funds.

A Director is…

Friday, June 3rd, 2011

A director is someone who makes blockbuster hits, true, but the kind of director we’re talking about is someone who helps run a company. A company or organization normally has a board of directors, which is a group of men and women who are elected by shareholders or other members of the organization to oversee its activities and make major decisions about how it operates. A director is one of those board members.

The word is used in a lot of different ways, though, and it can also refer to someone at the management level in charge of… directing things!

One More Thing, Before You Go…

Wednesday, May 25th, 2011


(photo credit: bredgur)

It’s not often that the Wall Street Journal writes for readers under 40, but they just published a really good article with financial advice for the pre-college population. Now, we’re not trying to get all parenty on you, but as pseudo-grownups we can assure you that a little planning goes a long way.* (And it really doesn’t take that much time out of your schedule.) Here are some of the points writer Zac Bissonnette makes:

  • > Debt becomes part of your life once you take it on. If you’re planning to use student loans to pay for school, remember that paying back those loans after graduation means part of every paycheck will belong to the bank.
  • > Speaking of paying for college, do you really need to pay for an ivy league degree? Success doesn’t depend on which school you go to – it depends on the effort you put in.
  • > Don’t get sucked in by materialism. The vast majority of people are not rich but still perfectly happy. But there are a lot of forces around you conspiring to make you feel poor and deprived. Tell them to go away.

(TILE Fun Fact: A small amount of debt can actually help you, by rounding out your credit history and boosting your credit score. But ONLY if you use it responsibly – that means pay it off, and never miss a due date.)

The most important question you need to ask yourself is this: What is this college degree really going to cost me, in terms of my dreams? Maybe you’d like to travel the world after graduation, or take an entry-level job in the nonprofit sector, or buy your first house before you’re thirty. Massive debt can really screw up your plans, so plan accordingly.

* For example, if you chose to invest $1,000 at age 18 and earned a paltry 3% return, you could have $3,500 waiting for you when you’re 60. (And by the time you’re 60, 60 will be the new 30.) All that with absolutely no effort. Well, you do have to take an hour to invest that $1,000 when you’re 18. See what we mean about planning?

Play with your own numbers to see what a little investment today can earn you: Compound Interest Calculator

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