For years, the neighbors in Petero’s village have called him Chairman Wabagaga (The richest man). Petero has really eaten his money and lived a posh life. Even his shamba boy drives a vitz to pick up groceries. What the villagers did not know was that all Petero’s businesses were running on bank loans. Last week, all these banks and loan sharks came calling and now Petero is stuck and has no money to pay all these debts. He is now afraid of the embarrassment of the villagers finding out about his problems.
In the law, there is a word for a situation like the one Petero is in and that is “bankruptcy”.
In simple terms, it is a state where a person is unable (not in a financial position) to pay their debts. For instance, if one of the banks or people who lent Petero money show up at the agreed time and Petero cannot pay them at that time, then we can say that Petero is in a state of bankruptcy.
To be clear, having debts that are more than the amount of money that you have does not mean that you are bankrupt. What creates a state of bankruptcy is when you are not able to pay those debts at the time that they are due to be paid. For example, If Petero had agreed with the banks that he would pay them next year and instead the loan sharks decide to demand him the money today and he fails to pay, it would not be right to call him bankrupt because it would mean that the loan sharks are coming for debts that are not yet due.
Do you know anyone who has been in Petero’s situation before? Let us know in the comments below
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