How Donald Trump Uses Bankruptcy to Become More Successful
It is not uncommon for a client to ask about Donald Trump and other famous large-scale bankruptcies. How can a rich person like Donald Trump file for bankruptcy, and how does he seem to come out of it more successful than ever? And is this something regular Americans can do?
Donald Trump is famous for filing for bankruptcy in order to get something that he wants. Chapter 11 can give the filer more power and flexibility. Trump has developed, upgraded, and changed his business by obtaining loans and time granted by the bankruptcy court, that his creditors would not have granted otherwise. How can an individual take advantage of this?
Donald Trump himself has never filed for bankruptcy, contrary to popular belief. However, Trump’s corporation has filed for bankruptcy several times. This is the first point that it is necessary to understand. Businesses can file Chapter 11 bankruptcy, which allows them to reorganize and create a plan to become more profitable. This is why most businesses that file for bankruptcy do so before they are absolutely on the last straw, and they often come out of bankruptcy in a much better position.
The only type of individual bankruptcy that is comparable to Chapter 11 is Chapter 13. In Chapter 13 bankruptcy, an individual can reorganize their life, decide what they want to keep and what they want to get rid of, and can pay off a large chunk of loans. They do this by creating and following a 3 to 5 year plan. At the end of the plan, the bankruptcy court will forgive any remaining unsecured debt.
Many people are skeptical of Chapter 13 because it takes a long time and requires paying some debts that do not have to be paid in Chapter 7. However, those who have a lot of secured debt or a lot of assets may be wise to consider Chapter 13 as an alternative.
Like Trump’s Chapter 11 reorganizations, individual Chapter 13 plans give those who use them a chance to develop a better plan, and often give more flexibility to the debtor that he or she may otherwise have.
Always speak with a local bankruptcy attorney before deciding if bankruptcy is the right choice for you.