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Elon Musk May Have Just Signed X’s Death Warrant | WIRED
(www.wired.com)
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this post was submitted on 18 Nov 2023
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Technology
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Why exactly do normal people with small defaults have 'collection agents' sent after them, while billion dollar defaults are written off? Isn't that supposed to be the other way around?
It's all to do with the terms of the contract and collateral.
Bonds are guaranteed by the collateral of the ownership of the company. If the company defaults on their loan, then ownership transfers to the bond holders, so the bond holders now own all the equity in the company (and previous equity holders get nothing.)
There are no collections agents for companies because once they default, all of that is essentially triggered automatically contractually. There's a bit of wiggle room with negotiating changing terms on the loans and such before a default happens, but that's the broad strokes.
because it's easier to come after real people, since we don't know all loopholes, can't jerk them around indefinitely, have no individual power, can't afford lawyers, and are all around an easier mark.