Reading about Rite Aid filing for bankruptcy. They have 3.3 in debt. By claiming bankruptcy they just wash their hands of it? Who eats all the debt?
In: 20
So you’re starting a lemonade stand. You get money from your sister, sugar from your neighbor, cups from your cousin, Lemons from your teacher, etc. You promise to repay them for these things on varying terms. You also all generally agree if issues arise in the future your parents will help determine the best course forward.
So you start your lemonade stand. It goes well and you open a few other stands in the neighborhood. You also maybe get your uncle to loan you wood to build more stands and your friend loans you markers and papers for signs.
Suddenly you hit a snag! People have lost their cravings for lemonade and you’re not selling as much as you used to. Lemonade is no longer the top drink on the street. Also, you had a few bad lemons and served some lemonade that made some of the kids sick and now their parents are demanding money.
At this point you’re also falling behind in repaying all those people that loaned you things in starting and continuing their business. They’re getting antsy. They’re starting to ask questions so you all agree to go to your parents for a solution.
The most likely plan you’ll start with is reorganizing your operation. Maybe your cousin you’ve been paying back $2 a week for a year agrees to $1 a week for two years. Maybe your teacher decides instead of paying her back $5 a month, she’ll just take a nickel from every cup of lemonade you sell. You might decide to scrap your stand on maple street because it is doing really bad and sell the wood, glasses, signs, etc. to pay some of the people you owe. Maybe you decide you’ll start selling Apple juice too because it’s more popular.
As long as the majority of the people agree on the plan and your parents approve it then you can continue to operate under these new terms.
There are also other options/scenarios.
Possibly a rich family friend from the nicer neighborhood steps in. They see you’re in a pickle and work out an arrangement with you to continue operations. They might still see promise in your lemonade stands and claim some stake in your stand to help keep it going. All those family and friends are also more reassured with this rich family friend involved because they might get their money back sooner.
Then there’s the scenario where an established business in the food industry takes interest. Possibly Panera Bread has been looking to get into the neighborhood lemonade stand market. They offer you a little bit for your operation. You oblige because at this point you want to get them off your hands. Just like with the rich family friend, all the people you owe also agree to this arrangement because they feel more confident in Panera than you at this point.
If you’re really deep in the hole and all else fails there is a final option. You sell off everything you have left in the operation. The chairs, leftover lemons, the cups, the wood for the stands, etc. Then you move forward in paying people back.
Generally, you’ll often owe more to the people than you got selling everything off. So say you owe everyone $120, but after everything is sold you only have $60. Then some people are going to come up short.
Also your parents oversee the whole process while you do it. This is done for many reasons. Maybe you sell some of your $5 lemons to your friend Jimmy for $2 and then he sells them at the farmers market again for $5 and splits the $3 profit with you. Maybe your lemonade stand has some cool limited edition batman cups you liked and you swipe before you have to sell things off. Your parents don’t want you profiting in this process.
Each person you owe has a different priority in getting paid back and what portion they get of that $60 that’s left. Your parents know the rules and watch you/guide you as you do it. Maybe per the rules your uncle gets paid first, then your cousin, then your teacher, then those kids you made sick, etc.
Also you usually have to pay a fee to your parents for having to arbitrate all of this. You also likely have your brother acting as a liaison between you and your parents and the people you owe. He’s also gonna want a cut too.
There’s also the, pretty rare, circumstance where you still owe more after that $60 is distributed. This is usually done if it’s found out you lied to all the people that loaned stuff to you. Even though you told them about a lemonade stand, you actually used your uncle’s wood for a skate ramp and the sugar to make cupcakes.
Your parents will be very upset with you if that’s the case. You’re likely to be put in timeout. They’re also going to sell your skateboard and PlayStation so they can repay all the people you lied to.
You may have also known your lemonade stand wasn’t doing well. So right before you went to your parents, you took the $20 in the lemonade stand piggy bank and gave it to yourself as a bonus. If your parents find out about that they’re going to try to get it back.
There’s a possibility that you were using the lemonade stand supplies for yourself a lot. If your parents find out about that as well they’ll probably take away some of the things you love to sell to repay the people you owe. That’s because you mixed your lemonade stand with your play things, so your play things will have to go bye bye too.
Finally, there are some circumstances where after you satisfy everyone you owe there’s still some money. You owe everyone $120. You have to pay your parents $10 and your brother that was helping you $10. However, you got $150 selling everything. Generally, you get to keep that leftover $10.
Latest Answers