In Reply to: genuine question posted by Foley on April 08, 2009 at 10:03:58:

Bad debts will not all be businesses/developers. Individuals who have bought homes and now find themselves without work and unable to pay their mortgages will also fall into this category. Also, where banks were dealing on international financial markets, these too can constitute bad debts now.

If people or businesses are unable to repay their loans, the usual process is seize the asset the loan was secured against, e.g house, business assets, land, etc. However the big problem is these no longer cover the amount owed so recovering the debts is not an easy matter.

Traditionally failure to repay a loan went against the business/persons credit rating and would make future borrowing more expensive if even possible.

Will be interesting to see how this is dealt with.