Debt Crisis

Based on the behaviour of financial institutions (and their lawyers) in recent years, I'd say the best term to define the practice described is "wishful thinking".

Seriously though, I remember hearing a word to describe this practice many years ago, but it's not jumping into my head. I keep thinking of "preferetial payments", which are different but related, and refer to the ranking of payments (and potential for a liquidator to recover) in the event of bankruptcy.

Will keep pondering....

I'm wondering whether the description is an antiquated concept of "defeasance", which is the annulment of a debt obligation by applying cash assets (bonds etc). But I've only ever heard of it used in a balance sheet context (ie debt defeasance), not for the payment of invoices in chronological order.

I had a look but can't find a term. It's not quite like a swap where counterparties have two seaparate contracts because they are paid simultaneously as a net pmt.

It's more like "FIFO reciprocity" but that's my term!

None of my friends knows.

Thanks SK and RobT, much appreciate your tuppences.

Maybe this one dictionary definition was a more generous treatment of defeasance, since this does introduce the idea of collateral condition, or claim.

While FIFO could well be the modernism. Shall offer both back to Rick to see if he's appeased. (Must admit, for a dictionary entry, it did seem a mouthful.)

There is the concept of "offset" too.

The closest thing I know of is called a contra payment, but it depends how specific the definition is. I have used it this way:
The party owing the lesser amount pays nothing, and the party owing the greater amount only pays the difference. Thus everything is square, but redundant fund transfers are avoided.

That's interesting, and perhaps the modern term to embody a lot of what this hazy archaism represented. Thanks CL.

I think a contra is the same as an offset.

I am Rick, i have looked up all the words offered here and discovered Amortise is what the oil companys do with my customers, champerty is what i would hope my solisitors would do for me, but there is never any money in it, contra is my middle name and the other posibiltys are not the word.

“If two companies owe each other money, then usually the oldest invoice is paid in full first. Thus the company receiving the payment in turn makes good their payment.”

i wrote this (the above) to show the irony of the meaning of the word im looking for, the dictonary discribed it as this below,

person 'A' owes person 'B' $10, person 'B' owes person 'A' $20, person 'Bs' debt is the oldest so therefore should be paid first, so person 'B' has to repay person 'A' $20 and then person 'A' can repay person 'B' the $10.

if they were mates, person 'B' would hand over 10 bucks and there square, there is a word that says person 'A' doesnt have to accept that, maybe there not mates any more.

sort of like reverse ransom, but it was up the front of the book, like in the first 500 pages or so, no further than the 'D' listings i think.

its in this Websters, i read it 20 years ago. at 2128 pages large, its like looking for the Ark

Thanks L & N, David and all others for your comments and efforts.