DOCSLIB.ORG

Worthlessness, Debt-Equity, and Related Problems William Natbony

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Worthlessness, Debt-Equity, and Related Problems William Natbony Hastings Law Journal Volume 32 | Issue 6 Article 1 1-1981 Worthlessness, Debt-Equity, and Related Problems William Natbony Follow this and additional works at: https://repository.uchastings.edu/hastings_law_journal Part of the Law Commons Recommended Citation William Natbony, Worthlessness, Debt-Equity, and Related Problems, 32 Hastings L.J. 1404 (1981). Available at: https://repository.uchastings.edu/hastings_law_journal/vol32/iss6/1 This Article is brought to you for free and open access by the Law Journals at UC Hastings Scholarship Repository. It has been accepted for inclusion in Hastings Law Journal by an authorized editor of UC Hastings Scholarship Repository. THE HASTINGS LAW JOURNAL [Vol. 32 Worthlessness, Debt-Equity, and Related Problems Table of Contents I. Statutory Overview: Worthless Securities and Bad Debts .............. 1409 A. Allowance ........................................... 1409 B. Characterization ................ ....................... 1414 C. Securities and Debts: Differences and Similarities ................ 1420 II. Ascertaining W orthlessness ........................................... 1422 A. Burdens of Proof ..................................... ........ 1426 1. Preliminary Burdens ..................................... 1428 2. Insolvency ...................................... ........ 1431 B. Identifiable Event ............................................. 1435 1. Bankruptcy and Receivership .............................. 1437 2. Reorganization and Foreclosure ............................ 1438 3. Revocation of Corporate Charter .......................... 1440 4. Continuation versus Cessation of Business, Liquidation, and Sale of Assets ............................................ 1441 5. Absence of a Market for Stock ............................ 1444 6. "Identifiable Events" ..................................... 1445 C. Irrevocable Insolvency-The Exceptional Case ................... 1446 1. Going Concern Value ..................................... 1448 D. Subsequent Events .......................................... 1449 E. Inconsistent Actions ........................................... 1449 III. Judicial and Regulatory Distinctions Between Debt and Equity .......... 1452 A. Distinctions Between Debt and Equity ......................... 1454 B. Section 385 ........................................... ....... 1455 C. Scope of the Section 385 Regulations ............................ 1459 D. The Judicial Approach ......................................... 1462 1. Factors of Hindsight-Form ............................... 1463 2. Factors of Hindsight-Intent ............................. 1466 3. Factors of Hindsight-Economic Factors ................... 1470 4. Factors of Foresight-Midstream Transformations ........... 1472 5. Factors of Foresight-Failure to Enforce on Default ......... 1475 6. Factors of Foresight-Advances Continuing After Insolvency.. 1477 7. Factors of Foresight-Accrual of Interest After Insolvency .... 1480 8. Effect of Equity Characterization ......................... 1483 E. Section 385 Regulations-Post December 31, 1981 Interests ....... 1486 1. Fair M arket Value ........................................ 1490 2. Reasonable Rate of Interest .............................. 1492 3. Non-Shareholder Instruments .............................. 1494 a. Hybrid Instruments ................................ 1495 4. Shareholder Obligations .................................. 1499 a. Bifurcation Rules ................................... 1499 b. "Safe Harbor" ..... ................................ 1503 6. Definitions ...................................... ........ 1504 a. Proportionality .................................... 1506 July 1981] DEDICATION 1405 7. Proportional Equity Factors ............................... 1512 a. Hybrid Instruments ................................. 1512 b. Instruments not Issued for Money .................... 1513 c. Excessive Debt ..................................... 1515 d. Change In Terms ................................... 1516 e. Payment History .................................... 1516 f. Instruments Payable on Demand ..................... 1517 8. Shareholder Obligations Not Evidenced by an Instrument .... 1518 9. Preferred Stock .......................................... 1521 F. Comments, Criticisms, and Comparisons ......................... 1523 1. Guaranteed Loans ........................................ 1525 2. Advances Continuing After Insolvency ...................... 1526 3. Accrual of Interest After Insolvency ........................ 1527 4. Reform .................................................. 1527 IV. Related Issues ....................................................... 1528 A. An Introduction to Consolidated Return Requirements Relating to W orthlessness ................................................. 1528 B. Administrative Requirements ................................... 1530 V. Conclusion .......................................................... 1532 Worthlessness, Debt-Equity, and Related Problems By WILLMm NATBONY*t It is a maxim of business that an investment is never made with the expectation of loss; few investments are made with even a suspicion that less than the original outlay will be returned. This perhaps explains the frequency of tax litigation on the issue of loss allowance: with little belief in downside risk, many investors are unprepared to document the context of a loss, having eschewed the legal counseling necessary to plan properly for all contingencies. Financial disaster thus often leaves investors unable to establish a current loss deduction. Recognizing that capital formation and economic growth re- quire speculation, Congress enacted tax provisions to mitigate in- vestor loss.1 The provisions relevant to this discussion concern two investment loss categories: securities2 and debts.3 Preferential treatment is accorded losses of either kind sustained in a business context, especially in the area of intercorporate investment, in which the stakes often are highest.' * J.D., 1975, New York University School of Law; L.L.M., 1976, New York University School of Law. t This paper was prepared while the author was on the faculty of St. Louis University School of Law. The author extends his grateful appreciation to his friend and colleague, Sandy Sarasohn, for his continuous support and guidance, and to Kim Sindel for her valua- ble assistance in the preparation of this Article. Copyright 0 1981, William Natbony. All rights reserved. 1. See Wall Street Journal, June 15, 1979, at 40, col 1 (discussing the 1978 Revenue Act's effect on venture capital). 2. I.R.C. § 165. All references and citations to sections in this Article are to sections of the Internal Revenue Code of 1954, as amended to the date of publication, unless otherwise indicated. All references and citations to regulations are to Treasury Regulations under the Internal Revenue Code of 1954, as amended to the date of publication, unless otherwise indicated. 3. Id. § 166. 4. See Dm. OF COMERCE, U.S. BuREAu OF THE CENsus, STATISTIcAL ABSTRACT OF THE UNrrED STATES § 18 (1979). [1407] THE HASTINGS LAW JOURNAL [Vol. 32 Generally, a loss deduction is allowed when "sustained." 5 Most often a loss is sustained when the loss property is sold or is other- wise disposed of.6 When there is no sale or other disposition of stock or indebtedness, however, planning and ascertaining the tim- ing of a loss deduction is more complex, with the stakes higher and the tax benefits more significant. Deductibility hinges on whether the stock or debt in issue is "worthless," a factual determination turning on administrative and judicial reaction to corroborative facts and to the degree of insolvency. An awareness of the judicial yardsticks for determining worthlessness is essential to defining the issues and to planning for the deduction. Even an allowable deduction for worthlessness may not be beneficial, however, if characterized unfavorably.7 An allowable loss is either capital or ordinary.8 Ordinary losses are fully deducti- ble by both individuals and corporations.9 Corporate capital losses, on the other hand, are deductible only against capital gains. 10 As corporate taxpayers rarely engage in capital gain transactions,"" 12 corporate capital losses are often useless. Loss deductions are also affected by events occurring after the apparent date of worthlessness. A seemingly allowable loss, deduct- ible against ordinary income, may be dissipated by subsequent conduct that is either inconsistent with worthlessness or counter- productive to peripheral tax benefits. Awareness of and attention to postworthlessness conduct is thus fundamental to planning the loss deduction. Moreover, the tax distinctions between debt and equity play an important role in that they may affect both the timing and the allowability of a worthlessness deduction. A debt obligation recharacterized as an equity interest may lose priority and become worthless at a date earlier than that expected by the taxpayer, thus possibly allowing the statute of limitations on deductibility to run. On the other hand, junior debt that is treated as debt for tax pur- 5. I.R.C. § 165(a). See notes 15-18, 32-43 & accompanying text infra. 6. See Treas. Reg. § 1.165-1(d). 7. See notes 69-76 & accompanying text infra. 8. See I.R.C. §§ 65, 1222(2), (4). 9. See id. §§ 65, 1222. See also id. § 1231. 10. Id. § 1211(a). Individuals' capital losses may be deducted only to the extent al- lowed by I.R.C. § 1211(b). 11. But see id. § 1231.
Load more

Recommended publications
  • Department of Administrative Services Offset Programs
    ISSUE REVIEW Fiscal Services Division January 5, 2017 Department of Administrative Services Income Offset Program ISSUE This Issue Review examines the Income Offset Program administered by the Department of Administrative Services (DAS). Money owed to the state and local governments is offset or withheld from individuals and vendors to recover delinquent payments. AFFECTED AGENCIES Departments of Administrative Services, Revenue, Human Services, and Inspections and Appeals, the Judicial Branch, Iowa Workforce Development, the Regents Institutions, community colleges, and local governments CODE AUTHORITY Iowa Code sections 8A.504, 99D.28, 99F.19, and 99G.38 Iowa Administrative Code 11.40 BACKGROUND The Income Offset Program began in the 1970s under the Department of Revenue (DOR).1 During that time, state income tax refunds were withheld by the Department for liabilities owed to the Department and other state agencies. In 1989, the Program expanded to include payments issued to vendors.2 In 2003, the Finance portion of the Department of Revenue and Finance became the State Accounting Enterprise (SAE) of the DAS and the new home of the Income Offset Program. Iowa Code section 8A.504 permits the DAS-SAE to recover delinquent payments owed to state and political subdivisions by withholding payments that would otherwise be paid to individuals and vendors.3 The DAS-SAE applies the money toward the debt an individual or vendor owes 4 to the state of Iowa or local governments. For example, if an individual or vendor qualifies for a 1 The Department of Revenue became the Department of Revenue and Finance in 1986 as a result of government reorganization and returned back to the Department of Revenue when the Department of Administrative Services (DAS) was created in 2003.
    [Show full text]
  • How to Handle Bad Debts There Often Comes a Time When Businesses
    How to Handle Bad Debts There often comes a time when businesses must account for nonpaying customers. This typically means deleting them from the company’s books and from regular accounts receivable records by writing off the outstanding receivable as a bad debt. Because bad debt write offs impact a firm’s cash flow and profit margins, credit professionals must use a combination of allowances and write-off guidelines, which must conform with Internal Revenue Service regulations, to handle this process. A firm’s general credit policy should include this information. Some companies establish allowance for bad debt accounts, contra asset accounts, to recognize that write offs are inevitable and to provide management with estimates of potential write offs. In 1986, the IRS repealed the use of the allowance method for tax purposes, taking the position that specific accounts are to be charged off only after they have been identified as uncollectible. Accountants, however, continue to prefer the allowance method, also known as the income statement method, since this method allows for matching bad debt expenses more closely with the time periods in which they were created. General accepted accounting principles rules require the allowance method to be used for external reporting. Allowances for Bad Debts Allowances for bad debts or uncollectible accounts accrue for bad-debt write offs in the accounting period that revenues are recorded, thereby matching revenues and expenses. They are contra-assets, reducing current assets (accounts receivable) accordingly on the company’s balance sheet. There, offsets give a more accurate picture of the outstanding receivables and provide a clearer picture of the firm’s performance.
    [Show full text]
  • Corporate Debt Management Strategy
    CORPORATE DEBT MANAGEMENT STRATEGY 1. Purpose of Strategy Stoke on Trent City Council is required to collect monies from both residents and businesses for the provision of a variety of goods and services. The council recognises that prompt income collection is vital for ensuring the authority has the resources it needs to deliver its services. The council therefore has a responsibility to ensure that appropriate mechanisms are applied to enable the collection of debt that is legally due. The council aims to achieve a high and prompt income collection rate. It endeavours to keep outstanding debt at the lowest possible level by instigating a payment culture which minimises bad debts and prevents the accumulation of debt over a period of time. 2. Scope of Strategy This Strategy covers all debts owed to the council including: Council Tax National Non Domestic Rates (NNDR, also known as Business Rates) Council House Rent Sundry Debt (general day to day business income including housing benefits overpayments and former tenant arrears). Whilst different recovery mechanisms may be used for different debt types all debt is recovered using the objectives below. 3. Objectives of Strategy The objectives of the Strategy are to: Maximise income and collection performance for the council Be firm but fair in applying this Strategy and take the earliest possible decisive and appropriate action Be courteous, helpful, open and honest at all times in all our dealings with customers Accommodate any special needs that our customers may have Work with
    [Show full text]
  • Medicare Human Services (DHHS) Centers for Medicare and Provider Reimbursement Manual - Medicaid Services (CMS) Part 1, Chapter 3
    Department of Health and Medicare Human Services (DHHS) Centers for Medicare and Provider Reimbursement Manual - Medicaid Services (CMS) Part 1, Chapter 3 Transmittal 435 Date: MARCH 2008 HEADER SECTION NUMBERS PAGES TO INSERT PAGES TO DELETE TOC 3-1 (1 p.) 3-1 – 3-2 (2 pp.) 0306 - 0310 3-5 - 3-6 (2 pp.) 3-5 – 3-6 (2 pp.) 0334 - 0334.2 (Cont.) 3-11 – 3-14 (4 pp.) 3-11 – 3-14 (4 pp.) NEW/REVISED MATERIAL--EFFECTIVE DATE: This transmittal updates Chapter 3, Bad Debts, Charity, and Courtesy Allowances to reflect updated references from HCFA to CMS, correction of typos, and replace Fiscal Intermediary with Contractor. Also, the Table of Contents has been revised to reflect deleted page numbers. EFFECTIVE DATE: N/A DISCLAIMER: The revision date and transmittal number apply to the red italicized material only. Any other material was previously published and remains unchanged. CMS-Pub. 15-1-3 CHAPTER III BAD DEBTS, CHARITY, AND COURTESY ALLOWANCES Section General Principle .................................................................................................................................300 Definitions..............................................................................................................................302 Bad Debts.........................................................................................................................302.l Allowable Bad Debts .......................................................................................................302.2 Charity Allowances..........................................................................................................302.3
    [Show full text]
  • Can't Pay Or Won't Pay? a Review of Creditor and Debtor Approaches to Non- Payment of Bills
    CAN'T PAY OR WON'T PAY? A review of creditor and debtor approaches to the non-payment of bills Nicola Dominy and Elaine Kempson Personal Finance Research Centre, University of Bristol March 2003 No. 4/03 Can’t pay or won’t pay? A review of creditor and debtor approaches to the non-payment of bills Nicola Dominy and Elaine Kempson Prepared for the Lord Chancellor's Department February 2003 The Research Unit, Department for Constitutional Affairs, was formed in April 1996. Its aim is to develop and focus the use of research so that it informs the various stages of policy-making and the implementation and evaluation of policy. Crown Copyright 2003. Extracts from this document may be reproduced for non- commercial purposes on condition that the source is acknowledged. First Published 2003 ISBN 1 84099 050 3 Contents Page Executive Summary v 1. Introduction 1 Research Aims and Methods 1 Structure of the Report 4 2. A map of can’t pay won’t pay 5 Reasons for arrears 5 Distinguishing can’t pays from won’t pays 8 Payment withholders 10 Working the system 15 Ducking responsibility 19 Disorganised 22 Mapping can’t pay won’t pay 24 3. Arrears management and debt recovery 26 Industry Codes of Practice and Guidance 27 Overview of company approaches to arrears management and debt recovery 32 Holistic approach 35 Hard business approach 39 One-size-fits-all approach 42 Changes in creditor approaches to arrears management and debt recovery 44 Creditors’ use and views of the courts 45 Debt collection agencies 52 Creditor’s abilities to distinguish can’t from won’t pay 53 4.
    [Show full text]
  • Budget Debt Management
    1 We’ll begin by talking about budgeting. First, we’ll talk about all of the reasons why making and maintaining a budget is a good idea. Second, we’ll discuss what components go into creating a budget Once that’s done, we’ll focus on actually establishing a budget Then, we’ll talk briefly about the importance of building savings. 2 Then we’ll move on to Debt Management. First, we’ll start by discussing why debt management is so important. From there, we’ll break down the difference between good and bad debt Third, we’ll then analyze different kind of debt to determine whether it’s good or bad. Once we know that, we can then prioritize any debt you might be holding We’ll then talk a bit about your credit. We’ll cover why it’s so important to monitor your credit… …and finally, what factors affect your all‐important credit score. 3 making a budget and sticking to it will help provide you with freedom from debt…and uncertainty. 4 Budgets don’t HAVE to be restrictive. YOU set them, and YOU control them, so you can make sure to factor in the “fun” items that are important to you, like taking a vacation, going out to dinner, or buying a new gadget you’ve been dreaming about. 5 A spending plan isn’t just a good idea…sometimes it can actually improve lives! Research shows that people who create a budget: 1. Are able to prepare for the future more than non‐budgeters, who tend to focus on and worry more about short‐term finances.
    [Show full text]
  • Allowance for Doubtful Accounts Receivable and Loans Receivable
    FIN 08-30 Reclamation Manual Directives and Standards Subject: Allowance for Doubtful Accounts Receivable and Loans Receivable Purpose: Establishes the Bureau of Reclamation’s procedures and responsibilities for estimating potentially uncollectible accounts receivable and uncollectible loans receivable. The benefit of this Directive and Standard (D&S) is to provide proper accounting of uncollectable accounts and loan receivables Reclamation-wide. Authority: Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standards (SFFAS) No. 1, Accounting for Selected Assets and Liabilities; FASAB SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees; FASAB SFFAS No. 18, Amendments to Accounting Standards For Direct Loans and Loan Guarantees in Statement of Federal Financial Accounting Standards No. 2; FASAB SFFAS No. 19, Technical Amendments to Accounting Standards For Direct Loans and Loan Guarantees in Statement of Federal Financial Accounting Standards No. 2; Department of the Interior, Departmental Accounting Manual (Section 8-30) Approving Official: Director, Mission Support Organization Contact: Business Analysis Division, Compliance and Audit Team (84-27410) 1. Introduction. In order to provide complete and accurate financial information, Reclamation must analyze delinquent debts and provide a current estimate of the uncollectible accounts receivable and uncollectible loans receivable on the financial statements. It is a normal part of doing business that not all receivables are actually collected, therefore, Reclamation establishes an allowance for doubtful accounts to reduce the gross amount of receivables to the estimated net realizable value. 2. Applicability. This D&S applies to all Reclamation employees who are responsible for the calculating, recording, and reporting of an allowance for uncollectible accounts receivable or allowance for uncollectible loans receivable.
    [Show full text]
  • Sovereign Default and Crisis Resolution
    Sovereign Default and Crisis Resolution Inaugural-Dissertation zur Erlangung des akademischen Grades eines Doktors der Wirtschaftswissenschaft (Dr. rer. pol.) Eingereicht am Fachbereich Wirtschaftswissenschaft der Freien Universität Berlin von: Diplom-Volkswirt Christoph Trebesch Geburtsort: Uccle (Brüssel), Belgien Juni 2011 Datum der Disputation: 07.01.2011 Erstgutachter: Prof. Dr. Helge Berger Lehrstuhl Geldtheorie und Geldpolitik Freie Universität Berlin Zweitgutachter: Prof. Dr. Henrik Enderlein Professor of Political Economy Hertie School of Governance ii Für meine Eltern iii Table of Contents 1. Introduction ................................................................................................................ 1 2. Sovereign Debt Disputes .......................................................................................... 11 2.1. Introduction .............................................................................................. 12 2.2. Analyzing Debt Crises: Previous Approaches ......................................... 14 2.3. The Index of Government Coerciveness .................................................. 15 2.4. Coding and Resulting Datasets ................................................................ 22 2.5. Results and Stylised Facts ........................................................................ 26 2.6. Explaining Government Coerciveness ..................................................... 30 2.7. Conclusion ..............................................................................................
    [Show full text]
  • T Are We Headed for a Global Debt Crisis?
    MARKETWISE Are We Headed for a Global Debt Crisis? the interest, and a few weeks later were forced to devalue Stephen Poloz and impose a partial debt moratorium. This all adds up to well over $1 trillion in bad debt, or more HE WORLD HAS BECOME A SCARIER PLACE IN THE PAST than 5% of world GDP. Were the bad loans mostly domestic, year. Asia has slid into a deep recession. Japan is they could be liquidated by each local central bank using T stuck in the muck and can’t help. World economic newly printed money. However, the situation is not that sim- growth is slowing, and there is even early talk of a ple. The major international banks have some $900 billion in possible global recession. cross-border loans outstanding in the developing world. More The waves of deflation coming out of Asia are hitting than half of this exposure is in the troubled parts of Asia and debtors hard, nowhere more than in Asia itself. Companies Eastern Europe. Although banks’ capital exceeds these expo- who took advantage of low US interest rates to borrow in US sures (unlike the situation in the early 1980s when Latin dollars have seen their liabilities skyrocket, even while defla- America defaulted), there is no doubt that a loss of 25% of the tion reduces their revenue stream. To make matters worse, outstanding loans would put a major dent in that capital. many Asian loans are secured with real estate, where prices European banks have been the most aggressive lenders, and have fallen by roughly 50%.
    [Show full text]
  • Bad Debt Deduction for Shareholder-Creditor Under Proximate Relation Test
    Washington and Lee Law Review Volume 28 | Issue 1 Article 8 Spring 3-1-1971 Bad Debt Deduction For Shareholder-Creditor Under Proximate Relation Test Follow this and additional works at: https://scholarlycommons.law.wlu.edu/wlulr Part of the Taxation-Federal Commons Recommended Citation Bad Debt Deduction For Shareholder-Creditor Under Proximate Relation Test, 28 Wash. & Lee L. Rev. 161 (1971), https://scholarlycommons.law.wlu.edu/wlulr/vol28/iss1/8 This Comment is brought to you for free and open access by the Washington and Lee Law Review at Washington & Lee University School of Law Scholarly Commons. It has been accepted for inclusion in Washington and Lee Law Review by an authorized editor of Washington & Lee University School of Law Scholarly Commons. For more information, please contact [email protected]. 1971] CASE COMMENTS Rule 14a-8 appears preferable to the alternative, which permits man- agement to employ corporate resources for social ends without being accountable to anyone but itself.94 As the Medical Committee court said: [T]here is a dear and compelling distinction between manage- ment's legitimate need for freedom to apply its expertise in matters of day-to-day business judgment, and management's patently illegitimate claim of power to treat modern corpora- tions with their vast resources as personal satrapies implement- ing personal political or moral predilections.95 HARVEY L. HANDLEY III BAD DEBT DEDUCTION FOR SHAREHOLDER-CREDITOR UNDER PROXIMATE RELATION TEST Section 166 of the Internal Revenue Code of 1954 provides for a deduction for a business bad debt in the year the debt becomes worth- less.1 When a taxpayer takes a business bad debt deduction he must establish that a true indebtedness exists,2 that the debt has become "See Bayne, Caplin, Emerson & Latcham, supra note 2.
    [Show full text]
  • Financial Distress Pg 541  Cancellation-Of-Debt Income (CODI)
    11/3/2016 2016 National Income Tax Workbook™ Financial Distress Pg 541 Cancellation-of-Debt Income (CODI) Bad-Debt Deduction Debt-Related Information Returns 1 11/3/2016 Tax Attributes NIB A tax attribute is one of a range of specific measures in the federal income tax calculation process that benefits the taxpayer. It's relevant in cases when a taxpayer is insolvent or bankrupt. The taxpayer must give up some or all of the benefit of tax attributes in return for receiving favorable treatment . Financial Distress Income pg 542 Transactions triggering tax consequences: 1. Transfer of assets - recognition of gain or loss 2. Discharge of debt Recognition of income or Exclusion of income under §108 with reduction of tax attributes 2 11/3/2016 Recognition of Gain or Loss pg 542 Repossession, forced sale, voluntary sale Example 16.1 Bank loan secured by stock Bank sold the stock and applied to loan Excess funds to Lotta Lotta has gain – sales price less basis Recognition of Gain or Loss pg 542 Repossession: Property Held for Sale Cash basis: postpone income by delaying sale - Financial distress can accelerate Example 16.2 Deduct crop costs 2016, to sell in 2017 Bank sells crop, 2016 income = FMV 3 11/3/2016 Recognition of Gain or Loss pp. 542-5 Repossession: Property Used in Business Depreciation recapture – ordinary income Example 16.3 § 1231 Gain or Loss Sale at > original cost → § 1231 gain Sale at < adjusted basis → § 1231 loss Example 16.4 Example 16.5 Example 16.3 pg 543 TP purchased a sewing machine $5,000 Claimed depreciation over several yrs.
    [Show full text]
  • Avoiding Fumbles with Debt Management
    Debt Lesson 5: Teacher’s Guide | Rookie: Ages 11-14 Avoiding Fumbles with Debt Management Understanding the costs and benefits of debt is essential to managing it effectively throughout life. This 45-minute module will prepare students to think critically about types of debt, debt loads, and strategies for managing debt. Getting Your Class Game-Ready: Each football Time Outline: 45 minutes total game won is the result of careful planning, strategic plays, and judgment calls. There is a risk with each Subjects: Economics, Math, Finance, Consumer pass and rush that yards might be lost instead of Sciences, Life Skills gained on the path to the goal line. In life, managing debt demands similar planning, Materials: Facilitators may print and photocopy careful decision-making, and a solid understanding handouts and quizzes, and direct students to the of the risks, costs, and benefits. With a solid online resources below. management plan, taking out loans can provide • Pre- and Post-Test questions: Use this short funds that allow you to reach goals such as paying grouping of questions as a quick, formative for college or buying a house. However, debt can assessment for the Debt module or as a Pre- and also spiral out of control, negatively impacting your Post-Test at the beginning and completion of the financial opportunities now and in the future. While entire module series. the topic of debt may seem overwhelming, it’s • Practical Money Skills Debt resources: important to keep your head in the game and take practicalmoneyskills.com/ff40 informed action to reach your goals.
    [Show full text]