You loaned your (former) best friend $50,000 to start a fruit fly habitat. You gave them the money three years ago. They haven't made a payment in 18 months. You haven't seen them in person in a year. They stopped returning your texts six months ago. Plus, they never even built that fruit fly habitat (poor little guys). That $50,000 loan can be considered toxic debt. You're never getting that money back. You're out that $50,000...more than you can afford to lose, really.
The most famous real-life example of toxic debt took place during the financial crisis of 2007-2008. After the subprime mortgage market tanked, many financial institutions were left holding mortgage-backed securities based on those bad loans. Toxic debt. The companies had no prospect of getting paid back on those investments. They couldn't sell them. They were stuck with the worthless loans. That outbreak of toxic debt metastasized into an all-out financial crisis. It led to a recession and a massive government bailout.
You, on the other hand, are probably not going to get that bailout. You're just out the $50,000. And then there are those poor fruit flies, forced to struggle cold and alone out there in the wild.
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Finance: What is a 1099?0 Views
Finance, a la shmoop. What is a 1099? Well it's a tax form for the rest of us the
non fully employed, the non recipients of crappy health care and benefit plans, the [Man looks shocked at his medical bill]
non recipients of fancy corporate business cards those of us who choose to [Business card for Brett Corporate]
go it on our own as consultants, contractors, day laborers and
independents who self employ under the yoke of many masters trying to make our [A contractors diary]
own little way in the world, yeah. Corporations who hire contractors in
whatever form, must deliver to those contractors a form 1099 which outlines [Corporation giving out 1099s to contractors]
and stipulates the details of the job performed for the contractee. That 1099
is a direct conduit to the IRS holding out their arm to shake your hand and [The form 1099s are sent to the IRS]
then turning it 90 degrees to the right. [IRS's hand out expecting something]
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