By Adam Mack, J.D.Hillary Stirling, Research AssistantWe’ve written in the past about US Presidents who filed bankruptcy, but since then, the United States has elected another president who has availed himself of the US Bankruptcy Code. So it seemed fitting that on this President’s Day we’d highlight yet again how even those who hold the highest office in the land can and have benefited from bankruptcy.Of course, as we’ve discussed elsewhere, bankruptcy laws have evolved over time, and so comparing the bankruptcies of Mr. Trump to other past presidents is something of an apples-to-oranges endeavor. Some US presidents have had to file personal bankruptcies, ones akin to the chapter 13 and chapter 7 filings of today. Others, like Abraham Lincoln, filed business bankruptcies, which are more similar to the chapter 11 bankruptcy law Donald Trump has utilized. Whether for an individual or a business, bankruptcy serves the same purpose: to give the filer a fresh start while ensuring that creditors get their fair share. Business bankruptcies allow the company to continue to function – pay its employees, bring in revenue, sign contracts, etc. – while the court sorts out which creditors get a portion of the debt repaid and how much that portion will be. The legal infrastructure is much the same as well, including exemptions, a bankruptcy estate, and trustees.Depending on how the company and its debt are structured, the owner of a company might also be personally liable for a portion of that debt. That happened to Mr. Trump in the 1991 bankruptcy involving the Trump Taj Mahal casino in Atlantic City, which was $3 billion dollars in debt, and he was personally on the hook for another $900 million. As part of the restructuring, he ended up selling his 220-foot yacht (the “Trump Princess”) and an airline company he owned in order to meet his personal liabilities. He also sold half his ownership shares of the company so that he no longer had a controlling interest; this concession won him a lower interest rate and more time to finish paying back the portion of the debt that was not discharged.Whether you’re an average person on the street or President of the United States, a clock-puncher or a business tycoon, if you’re in over your head in debt, please contact us to see if bankruptcy is right for you! Like your fellow-citizens, you have options and the possibility of a fresh financial start.
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