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Definitions B [ClearOnMoney]
Top

Site

About
Contact

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Definitions B

Reference

Main
Updates
Schedule

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Reference

Definitions B

Balloon payment

A balloon payment is a final, larger payment closing a loan.

From the AssuredHomeLoans.com mortgage glossary:

“A final payment finalizing a debt in which the amount paid is substantially more than previous installments.”

From Northern Trust:

Balloon Mortgage

A mortgage with periodic installments of principal and interest that do not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specified date in the future, usually at the end of the term.

Balloon Payment

The final payment (balance due) of a balloon note.”

Bankruptcy chapters

There are four chapters of the law under which bankruptcy is filed in the United States. An oversimplified view, as a first orientation:

  • Personal, Chapter 7 or Chapter 13
    • Chapter 7 – Liquidation – Lose all but certain exempt possessions, but any remaining debt discharged
    • Chapter 13 – Rescheduling – Keep possessions, but continue to pay some fraction of obligations for up to 5 years
  • Chapter 11 – Business
  • Chapter 12 – Farmers

From the Minneapolis Fed:

“Consumers and businesses also have different filing options available. Most consumers pursue what's known as Chapter 7 bankruptcy, a measure releasing them from most debt liability after they pay off as much as they can. In most cases Chapter 7 allows consumers to keep their houses, an automobile, insurance, wages and retirement funds and some property. A Chapter 7 shows up on credit reports for a decade, making it more difficult for consumers to get credit again without paying high interest rates. Chapter 13, in contrast, allows debtors the option of paying back secured creditors—banks, mortgage companies and so forth—as well as unsecured creditors, who usually receive a portion of the total payment over a three- to five-year span. (A rule of thumb is 10 cents on the dollar, but those figures are determined by a bankruptcy trustee and the debtor.) Chapter 12, meanwhile, is designed for family farms, and Chapter 11 handles business bankruptcies, although consumers can also use it in rare cases.”

From the American Bankruptcy Institute:

“Chapter 7 of the Bankruptcy Code is available to both individual and business debtors. Its purpose is to achieve a fair distribution to creditors of the debtor’s available non-exempt property. Unsecured debts not reaffirmed are discharged, providing a fresh financial start.

Chapter 11 of the Bankruptcy Code is available for both business and consumer debtors. Its purpose is to rehabilitate a business as a going concern or reorganize an individual’s finances through a court-approved reorganization plan.

Chapter 12 of the Bankruptcy Code is designed to give special debt relief to a family farmer with regular income from farming.

Chapter 13 of the Bankruptcy Code is available for an individual with regular income whose debts do not exceed specific amounts; it is typically used to budget some of the debtor’s future earnings under a plan through which unsecured creditors are paid in whole or in part.”

From Wikipedia:

“The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. In Chapter 7, a debtor surrenders his or her non-exempt property to a bankruptcy trustee who then liquidates the property and distributes the proceeds to the debtor's unsecured creditors. In exchange, the debtor is entitled to a discharge of debt, except that the debtor will not be granted a discharge if he or she is guilty of certain types of inappropriate behavior (e.g. concealing records relating to financial condition) and except that some debts (e.g. spousal support, student loans, some taxes) will not be discharged even though the debtor is generally discharged from his or her debt. Many individuals in financial distress own only exempt property (e.g. clothes, household goods, an older car) and will not have to surrender any property to the trustee. The amount of property that a debtor may exempt varies from state to state. Chapter 7 relief is available only once in any eight year period. Generally, the rights of secured creditors to their collateral continues even though their debt is discharged (e.g. absent some arrangement by a debtor to surrender a car or “reaffirm” a debt, the creditor with a security interest in the debtor's car may repossess the car even if the debt to the creditor is discharged).

In Chapter 13, the debtor retains ownership and possession of all of his or her assets, but must devote some portion of his or her future income to repaying creditors, generally over a period of three to five years. The amount of payment and the period of the repayment plan depend upon a variety of factors, including the value of the debtor's property and the amount of a debtor's income and expenses. Secured creditors may be entitled to greater payment than unsecured creditors.”

From the New York Fed:

“Under Chapter 13 (rescheduling), filers get to keep all their assets but commit to continue paying creditors for three to five years out of future income. Under Chapter 7 (liquidation), filers keep all their future income but lose any home equity that is not exempt under their state’s bankruptcy law (Table 2). Any unsecured debts, including credit card and personal loans, that are not paid from the proceeds of liquidation gets discharged.”

Basis point

A basis point (bp) is one one-hundredth of a percentage point. E.g. 50 bp is one half of one percentage point.

Business cycle

The business cycle refers to long-term, economy-wide fluctuations in economic activity. The good periods are typically described as expansion, and the bad periods as recession. Business sectors, stocks, or indicators that show high variation with the business cycle are typically described as highly cyclical.

Investopedia (http://www.investopedia.com/terms/b/businesscycle.asp):

“The recurring and fluctuating levels of economic activity that an economy experiences over a long period of time.”

Wordnet at Princeton (http://wordnetweb.princeton.edu/perl/webwn?s=business%20cycle):

“business cycle (recurring fluctuations in economic activity consisting of recession and recovery and growth and decline)”

Wikipedia (http://en.wikipedia.org/wiki/Business_cycle):

“The term business cycle or economic cycle refers to economy-wide fluctuations in production or economic activity over several months or years, around a long-term growth trend. It typically involves shifts over time between periods of relatively rapid economic growth (expansion or boom), and periods of relative stagnation or decline (contraction or recession).”