ClickCease

Bankruptcy

Clear Counsel Law Group / Bankruptcy

If Married, Do I have to File for Bankruptcy with My Spouse?

 

As a married person, do I need to file for bankruptcy with my spouse?

Transcript:

Hi, this is Matt McArthur, bankruptcy attorney at Clear Counsel Law Group. I was recently asked a common question that's presented to me during consultations and the question is this, "I'm a married individual. If I'm thinking about filing for bankruptcy do I have to file with my spouse?"

The answer to this question is simply no, but there are a couple of things to keep in mind if you plan on filing bankruptcy as a married individual, but not including your spouse in the filing of the bankruptcy.

The first concern is that only debt that is in the filing spouse's name is going to be discharged as part of the bankruptcy process. In other words, because the non-filing spouse never filed for bankruptcy, the debts and responsibilities to pay those debts that are in the non-filing spouse's name, will follow them after the discharge of the filing spouse's bankruptcy.

Now, that's kind of a mouthful to think about, but just think of it this way, the person filing for bankruptcy gets their debts wiped out and the person that doesn't file for bankruptcy, obviously, is going to be stuck with those debts after the filing of the bankruptcy of their spouse.

The other thing to keep in mind is, particularly in the Chapter 7 case, even the non-filing spouse's assets can be part of the bankruptcy's process and that a Chapter 7 bankruptcy, where assets could potentially be liquidated to pay off creditors, this is of a major concern that you want to be able to address with an experienced bankruptcy attorney to make sure that you're not going to lose any valuable property like a non-filing spouse's car, or perhaps a non-filing spouse's jewelry that you didn't really think about when you were speaking with your attorney originally because they weren't going to be part of the bankruptcy process.

The fact of the matter is, even the non-filing spouse's assets could potentially be part of the bankruptcy estate sold off to creditors and the non-filing spouse probably isn't going to care for that very much, if you filed for bankruptcy and lost all their items.

Please, before you file for bankruptcy and consider filing as an individual, if you're a married person, please speak with a bankruptcy attorney and address these issues to determine exactly what protections are in place for you as an individual to file without your spouse.

Until next time, I'm Matt McArthur signing off. We'll see you.

Bankruptcy / Bankruptcy Videos - 10/15/2015

What is a 341 Meeting in Bankruptcy?

 

Do you need to worry about your 341 meeting in bankruptcy?

Transcript:

Hi, I'm Matt MacArthur, bankruptcy attorney at Clear Counsel Law Group. I had somebody in my office the other day that was really upset and anxious and quite nervous about a meeting that we were going to have with creditors and the bankruptcy courthouse. This is a meeting that happens in all bankruptcy cases, and I thought this would be a great opportunity to address what goes on in these meetings, and perhaps to put all of your minds at ease about what actually occurs there. This meeting is called the 341 meeting of creditors. The 341 number comes from the section of the bankruptcy code that says that we have to have this meeting. The meeting of creditors part is perhaps a bit of a misnomer because creditors will rarely appear at these hearings. Creditors do have the opportunity to appear if they want to, but I would say it's probably less than 5% of cases, perhaps less, in which creditors actually do show up and ask questions. What usually happens is it'[s a meeting that happens at the bankruptcy courthouse down in a side-mediation type room, where a court official called a bankruptcy trustee will record the hearing and swear in the debtor under oath.

"Do you solemnly swear to tell the truth, the whole truth, and nothing but the truth?" Type of oath. Once you're under oath, the trustee will ask you questions, and the trustee's purpose is typically twofold. One, the trustee is looking to determine whether not you actually filled out all the paperwork correctly, that everything was completely and accurately listed in the bankruptcy documents, that you actually reviewed these documents with your attorney and signed these documents authorizing the filing of the bankruptcy case. The second, the trustee is also looking to see whether not there's any assets that are unprotected or not exempt. The trustee is the individual that's responsible for collecting any nonexempt assets, selling them off for creditors in a Chapter 7 case, or making sure that adequate payments are being provided for in a Chapter 13 plan, and taking care of the administrative side of the bankruptcy case. If creditors are present, they'll have an opportunity to ask questions as well.

Obviously, you'll be under oath at this hearing, so the best advice that I can give is to tell the truth. You get into a lot of trouble when you don't tell the truth, and the vast majority of cases ... Individuals have nothing to hide anyway, so honesty is clearly the best policy at these hearings. A typical hearing lasts anywhere from 3-6 minutes depending on the complexity of the case. They can go much longer if there's a lot of complicated issues involving businesses or non-exempt assets, but the typical person filing for bankruptcy will only be in the courtroom where they're being questioned for a matter of minutes, and then they'll be on their way without any real reason to sweat. The biggest caution that I give to my clients is to tell the truth, and I try to tell all of them to relax because these are really ... Although they're unofficial hearings ... They are official hearings and you will be under oath, there's kind of a laid back setting to them. The trustees are typically very nice, and it's one more obstacle that you have to go through to get your bankruptcy discharge, but on a whole, these hearings are nothing to fear as long as you tell the truth. Then you've disclosed everything to your bankruptcy attorney. Your attorney will have you well-prepared for these hearings. This is Matt MacArthur, bankruptcy attorney at Clear Counsel Law Group, saying goodbye for now.

Bankruptcy / Bankruptcy Videos - 10/13/2015

Will I Get My Tax Refund if I File for Chapter 7 Bankruptcy?

 

What happens to your tax refund if you file for bankruptcy?

Transcript:

Hi. Matt MacArthur, Bankruptcy Attorney, Clear Counsel Law Group. I had somebody in my office the other day who was getting ready to file for Chapter 7 bankruptcy, and they asked a very common question. Am I going to be able to get my tax refund next year or am I going to lose it through filing for bankruptcy? The answer to this question is: it depends. Classic lawyer answer. It actually depends on a number of different things.

To answer the question, first, we need to back up a little bit and think what a Chapter 7 bankruptcy is. Chapter 7 bankruptcy is a liquidation bankruptcy. It involves the process of listing all of a persons assets and determining whether or not those assets are exempt or protected. Or whether they're going to be subject to liquidation or seizure by the bankruptcy court to be distributed to an individual's creditors in exchange for the discharge or the wipe out of the debt.

The question then becomes, so it relates to a tax refund, is a tax refund an asset that can be protected? This is where the depends part comes in. A tax refund is definitely an asset and it needs to be protected in order to be preserved for the individual to be able to keep the funds that come in the refund the following year. Whether or not it's something that can be protected is going to depend on what state the person is filing in and what state's exemptions or protective laws are available for this individual to claim as part of their bankruptcy process. It also depends on what the nature and make up of tax refund is. There are certain kinds of refunds that people will receive that contain something that's called Earned Income Credit. That's a very commonly protected portion of a tax refund. It also depends on the amount of the refund. There's several different factors that determine whether or not a person can keep their refund.

It's impossible for me to give a general answer for everyone whether or not they'll be able to keep their refund or not. Again, it's a very fact intensive analysis that we go through to determine whether or not a person can keep their refund.

If you come in and see me or another experienced bankruptcy attorney, I'll do my best to make sure we go through the facts of your particular case, and let you know, with a very high degree of certainty, what the outcome is going to be in relation to your tax refund for the following year. Until next time

 

Bankruptcy / Bankruptcy Videos - 10/09/2015

How Bankruptcy can Assist You with a Payday Loan

 

How will bankruptcy protect me from the unfair terms of a payday loan?

Transcript:

Some of the most aggressive predators that we come across are payday loan lenders. These payday loan lenders are notorious for charging high interest rates and putting people in a situation where it's near impossible to pay off these loans and get back to square one. Question often arises where a client asks me, can we wipe out the payday loans, and what can we do to stop these payday loan lenders?

The bankruptcy laws apply to the payday loan lenders just like they do all other creditors that would normally be encountered in a bankruptcy case. Now there are a couple of unique situations that apply directly to these payday loan lenders. Because of their aggressive tactics, one common situation that we come across is that in order to sign up for a loan in the first place, our clients have already granted the payday loan lenders direct access to their bank account. Now this means when the money is owed, they simply go into your bank and they take it out.

What we find is that when we file for bankruptcy and we send out a notice of bankruptcy, there are situations where the payday loan lenders are slow to update their systems and they continue to take money out of your bank account even after you've filed for bankruptcy. That's why it's very important to find an attorney that is aware of these issues, that will contact the payday loan lenders immediately upon filing your bankruptcy so that there isn't this issue.

Now, sometimes it happens where these payday loan lenders, either they're incompetent and they don't update their systems to reflect there's a bankruptcy automatic stay in place. In other words, that they can't touch your money in your bank account. Or they simply are ignoring the bankruptcy laws. This is money that can be taken back from those payday loan lenders. As long as we filed for bankruptcy before they take the money, that's money that we can get back. Again, I urge you that if you have payday loans, to speak with a bankruptcy attorney who can help you fight these very aggressive creditors and keep them off your back.

Bankruptcy / Bankruptcy Videos - 10/07/2015
Eviction, bankruptcy, nevada, las vegas

Can Bankruptcy Save Me from a Potential Eviction?

Being forcibly removed from your home with all of your belongings is a terrifying, but very real concern that is faced by individuals that have received a notice of eviction posted to their front door. An individual’s home is normally a place of sanctuary and refuge from the concerns of the outside world, however, when an eviction notice is posted, the turbulent storms of the outside world threaten to destroy this place of refuge and potentially leave the evicted person homeless. Fast action must be taken in order to avoid such a devastating result.

Finding a new place to live can often take weeks, let alone arranging for the transportation of personal belongings to the new residence. Once a notice of eviction is posted on your front door, however, you simply may not have that kind of time to make arrangements to leave on your terms.

 

How Bankruptcy Can Help With an Eviction

Perhaps the most powerful means to buy some additional time to make arrangements for securing a new residence is by filing for bankruptcy. The filing of a bankruptcy case invokes powerful federal laws that trump1)No, not that Trump local eviction laws, and these laws stay2)meaning cease any collection actions, including the eviction process. In other words, by filing a bankruptcy a person can put a stop to an imminent eviction from his or her home. Unfortunately, the stop put in place by the bankruptcy laws is likely only a temporary solution if the individual being evicted does not have the ability to get back in good standing with the landlord (i.e., paying back missed rent payments, etc.) relatively quickly.

Most people that I meet with in this situation, however, know that their time is limited and are not necessarily looking to stay in the property long term, but rather they are looking to buy a little additional time to find a new residence so they do not end up on the streets while simultaneously addressing any financial liability that may result from breaking a lease and being evicted. Filing bankruptcy will assist you with each of these objectives.

Additionally, as is often the case, people who face eviction often have more debts than just back rent. Since rent is usually the first bill that gets paid in most households, the fact that someone is behind on their rent is indicative of a person’s financial situation as a whole, where Peter has been robbed to pay Paul, and a host of other debt and financial liability is outstanding. By filing for bankruptcy, not only will it give a person some time to put their move in motion, but it will wipe out all other dischargeable debt holding a person down and allow for a fresh start financially.

If you are facing an eviction, I highly recommend speaking with an experienced bankruptcy attorney that can advise you regarding how much additional time a bankruptcy case would allow you, and whether or not you are a good candidate for the bankruptcy process.

Footnotes

Footnotes
↑1 No, not that Trump
↑2 meaning cease
Bankruptcy - 10/05/2015

Redemption: How to Declare Bankruptcy and Keep Your Car

 

Redemption Can Save Your Car in Bankruptcy

Transcript:

One of the worst investments you can make is to buy a brand new car and then to drive it off the lot. Everybody knows the moment you drive it off the lot the car depreciates in value. It's a very common situation for me to meet with people that have purchased a car and the financing is such that they owe much more on the car than the car is actually worth. There's something really cool that we can do to fix this terrible investment in a Chapter 7 Bankruptcy and it makes me pretty excited actually to tell you about this.

This is what we call a Redemption. The sound of that word just sounds good, Redemption. We've got this car; this car was a great car at one time. We wanted to buy it. We took out a big loan to pay for this car but now we're not so in love with the car anymore partly due to the fact that we owe so much money on the car.

What is a Redemption? A Redemption inside a Chapter 7 Bankruptcy is a situation where the car is worth less than what is owed and Chapter 7 Bankruptcy allows a person in this type of Bankruptcy to pay off this car for what the car is currently worth and not what you owe on the car under the contract terms. Now, a lot of people considering Chapter 7 Bankruptcy simply don't have the money, the thousands of dollars that's usually necessary to pay for the car in order to make the original creditor go away and release the title on the vehicle. However, we are able to obtain independent financing from a third party financial institution to obtain the funds and essential create a new loan for the car. This new loan is going to be for what the car is worth and not what you owe. We only do it in those situations where we're able to drop the principle amount owed on the car.

This also will be accompanied by lower monthly payments making the car more affordable in the near term future as well as the long term future. You may be thinking, "I'm filing for bankruptcy. I probably have very bad credit. How am I going to qualify for financing on this car?" There are lenders that specialize in this type of financing. It's going to result in a higher interest rate, usually in the neighborhood of 23-24% but if we're knocking off thousands of dollars off of the principle loan balance and we're able to lower your monthly payments t usually ends up being a good deal for you.

The really cool thing is if you've fallen behind on your monthly payments on your current car loan those monthly payments get rolled into the purchase of the vehicle and to the Redemption payoff. You're essentially starting a new loan in which you will be current and you won't be behind on your monthly payments anymore, the payments will be lower than what they were before and if you're able to pay off the car more quickly you're able to take advantage of that lower principle balance and the higher interest rates won't come back to bite you at all. I really believe in the Redemption process and it is a great option for a lot people that found themselves upside down in a car loan.

 

Make sure to subscribe to our YouTube channel! Thanks for watching.

Bankruptcy / Bankruptcy Videos - 10/02/2015

When are Creditors Allowed to Garnish Wages?

 

When are creditors permitted to garnish wages?

Transcript:

One question that I often get is, "When can a creditor start garnishing their wages?" The answer to this question is a little bit complicated. It all first starts with a debt that you owe a creditor. The creditor has a right to receive this money from you and if you don't make that payment, they can eventually take you to court and they will sue you and if you owe the money, there's really not that much of a defense that you can present in court to stop this creditor from getting a judgement. There may be some procedural or technical maneuvers that you can make to make the creditor's life more difficult and obtaining a judgement.

However, if you ultimately owe the money, the creditor will most likely eventually get a judgement against you. Once that creditor has reduced the amount that you owe them to the form of a judgement, they can take this judgement which is an order from the court that says that you owe that creditor the money and they can then take that judgement and get what we call a writ of execution. A writ of execution is essentially an order for the constable to go to your employer and start garnishing your wages. Now, what time frame is involved in this can vary depending on how quickly creditors are able to move through that initial state court lawsuit and obtaining a judgement and getting garnishment actually processed with the constable and with your employer. About the fastest that we usually see this process play out is about four to five days but you definitely want to act quickly once you've received a service of a summons for a state court action against you or a lawsuit because that means the creditor is actively seeking a judgement and we'll be seeking a wage garnishment against you in very short order.

Now, there are certain types of income that are exempt from wage garnishment or garnishment in general. Social security income in particular is a common type of income that I see that is exempt or protected meaning that even with a wage garnishment order or a writ of execution, there's no way for the creditor to take the money directly from that check that comes from the social security administration office. Now, there's a couple of different kinds of garnishment that we talk about. Another kind is taking money directly out of your bank account which we call a bank levy. Bank levy is a little bit different from a wage garnishment. In the wage garnishment they're taking money directly from your paycheck or from your social security check which they're not allowed to do. With the bank levy, they're taking money directly out of your bank account and instead of going to your employer, the constable goes to your bank and shows them that order that they're entitled to money and they can drain your bank account in order to pay off the debt that you owe them.

Now, bank levies are a little scary because I've come across a number of situations where creditors aren't very diligent in seeking out what type of money is being held in the account so even if you're holding protected funds, money that came from the social security office in your bank account, I've seen that money be levied and taken by creditors. Now, that's money you can get back but it's a difficult process to go through the mechanics of actually getting that money returned to you.

Along with this question of, "When can my wages be garnished?" is "What can I do to stop the garnishment?" There's two main ways of stopping the garnishment. One is to pay the money that you actually owe the creditor which if you're in the situation where you're being sued for this money, it's very unlikely that you have the money to pay them back. The other option is to file for bankruptcy and invoke the protections of the automatic stay of the bankruptcy code. Immediately upon filing for bankruptcy, the automatic stay goes into effect and it will stop a wage garnishment.

Bankruptcy / Bankruptcy Videos - 09/29/2015
homestead exemption, bankruptcy , nevada, castle

The Homestead Exemption in Nevada

As the old saying goes, a “man’s house is his castle.” This well-known legal maxim is one of the most deeply rooted principles in the American legal system1)See Weeks  v.  United  States,  232  U.S.  383,  390  (1914)  discussing  the  influence of  the  common-law  maxim  on  the  Supreme  Court., and embodies the idea that an individual’s home is a place of refuge from the cares of everyday life. However, just like a castle relies upon a moat, draw bridge, towering stone walls and the like to help keep the castle safe from outside threats, a person’s home must have certain protections in place that allow the resident to retain possession of the home, or the refuge provided by the home would be seriously undermined by the risk of losing the property to others.

One of the most serious threats to a person’s ability to keep their home is creditors, who can be likened to modern day marauders who would love nothing more than to storm the castle and kick the occupant(s) out on the streets. Creditors are in the business of collecting money. Period. If a creditor is not getting paid they often seek to forcibly take the money that they are owed through the legal system by any means possible. If there is equity in a person’s home that is not protected by law, and that person has not paid a creditor money that is owed under the law, then the creditor can potentially put a lien on the home and forcibly sell it in order to get paid from the equity available. The scary thing is that although a person may not currently owe any creditors on outstanding debts, it does not mean that an unexpected debt could not arise from any number of scenarios such as: liability in a car accident, a failed business venture, unexpected health or medical expenses, etc. Fortunately, as mentioned above, the law has long recognized the importance of an individual’s home, and, in most cases, provides for a way of protecting a person’s primary residence.

 

How the Homestead Exemption Protects You

The protection available in Nevada for an individual’s primary residence is referred to as the Homestead Exemption. The homestead exemption protects up to $550,0002)Although the homestead exemption allowed under Nevada law allows for $550,000 of protected equity, in bankruptcy cases, federal bankruptcy law limits the amount of protected equity in the home if the home was purchased less than 1215 days prior to the claimed exemption. If the home was purchased more than 1215 day prior, then the full extent of Nevada’s homestead exemption is available. of equity in a person’s home. This protection only applies to a person’s primary residence. Investment properties, rental properties, vacant land, etc. do not receive protection from Nevada’s homestead laws. Also, to invoke the homestead protections offered by Nevada law, it is necessary to record a Declaration of Homestead3)The form for Nevada’s Declaration of Homestead can be obtained here  with the county recorder in the county where the property is located. Once the declaration is recorded with the county recorder’s office, the home will be protected as that individual’s homestead as long as the individual remains living in that home.

Of course, the homestead exemption does not allow an individual to keep his or her home if s/he fails to pay a mortgage that was obtained by using the home as collateral. The exemption does protect against “outside” creditors like credit card companies, payday loans, judgment creditors, etc.  It is recommended that you speak with an attorney to discuss the full impact of declaring your personal residence to be a homestead so that you can erect legal protective barriers between your home and a host of potentially devastating results.

 

Footnotes

Footnotes
↑1 See Weeks  v.  United  States,  232  U.S.  383,  390  (1914)  discussing  the  influence of  the  common-law  maxim  on  the  Supreme  Court.
↑2 Although the homestead exemption allowed under Nevada law allows for $550,000 of protected equity, in bankruptcy cases, federal bankruptcy law limits the amount of protected equity in the home if the home was purchased less than 1215 days prior to the claimed exemption. If the home was purchased more than 1215 day prior, then the full extent of Nevada’s homestead exemption is available.
↑3 The form for Nevada’s Declaration of Homestead can be obtained here 
Bankruptcy / Nevada Law - 09/23/2015

Will Declaring Bankruptcy End the Harassing Creditor Phone Calls?

 

How Declaring Bankruptcy will help end the annoying phone calls from creditors:

Transcript

One of the first things that gets asked by clients when they come in and talk to me is, can I stop the annoying and harassing phone calls from all these creditors and will a bankruptcy stop these creditors from calling me? The answer is yes. The moment we file for bankruptcy, a law called the automatic stay goes into effect. Think of the automatic stay like a big collections freeze. It applies to virtually any and all creditors seeking to engage in any type of collection activity. That includes phone calls. Now there are certain circumstances in which the automatic stay may not go into effect. If, for example, you have a couple of recent bankruptcies that you filed earlier in the year that were unsuccessful and were dismissed, in those situations the automatic stay won't go into effect. If you have one previous dismissal, the automatic stay will expire after 30 days. You want to be very careful that you're aware of the limitations of the automatic stay.

Another situation where the automatic stay may come up a little bit short is in certain situations, creditors can ask for relief from the automatic stay where they essentially file a motion with the bankruptcy court and ask the bankruptcy court for permission to engage in collection activities against you. These situations are usually limited to secured creditors such as a mortgage company or a car company that has a loan in your name, and you haven't been making the payments on that loan. From a practical standpoint, if we're just talking about phone calls and stopping them, the automatic stay goes into effect immediately upon filing a bankruptcy, but the notice of the bankruptcy doesn't get sent out to these creditors until a few days have past. When we file your bankruptcy, we have a big list of your creditors along with their addresses. Then the bankruptcy court mails out notices of your bankruptcy filing to these creditors. The mailing may take a few days to get to these creditors and for them to update their systems before they actually are aware that you have actually filed for bankruptcy.

Now if the phone calls are annoying, and you want them to cease immediately, there's definitely the opportunity to tell these creditors that you've filed for bankruptcy, provide them with your bankruptcy case number, give them your attorney's contact information and let them know that they are not allowed to contact you directly. This should be sufficient to get the phone calls to stop. If for whatever reason that doesn't stop the phone calls, involve your attorney. Have your attorney make the phone call directly to these creditors. That's usually enough then to get their attention and get them to stop. If all of this fails and for whatever reason there's a creditor that's not willing to honor and comply with the federal law of the automatic stay, you have the option of asking the bankruptcy court to issue sanctions against a creditor who is particularly unruly and unwilling to follow the federal law.

I suggest that you consult with a bankruptcy attorney that has experience in these issues and that is familiar with your protections that are available to you by filing for bankruptcy. Your attorney will make sure that you get the very protection that's available under the law.

Bankruptcy / Bankruptcy Videos - 09/09/2015
Trump bankruptcy, Donald trump, bankruptcy

The Trump Bankruptcy and You: What We Can Learn

With the upcoming CNN Republican Primary Debate on Wednesday, September 16, 2015, it seems an ideal time to revisit one of the more interesting exchanges during the last Republican primary debate1)Brian was kind enough write up a debate recap in case you missed it hosted by Fox News. While the broader consensus among political commentators was to offer praise to the Fox News moderators for the debate for asking tough questions, an exchange between Fox News’ Chris Wallace and Republican Presidential Candidate Donald Trump seemed amiss, and if it fell short of a targeted attack on Trump, it was at best, a misguided attempt to ask the “tough questions” and provided a skewed view of what bankruptcy actually is.

The exchange began with a fair and legitimate line of questioning when Wallace2)or as close as he could get, referencing Trump’s claims to be the best candidate running to grow the economy, asked why “we should trust [him] to run the nation’s business,” when his companies have filed for bankruptcy 4 times in the last quarter century.

You can watch the entire exchange between Donald Trump and Chris Wallace below regarding the Trump bankruptcy:

 

This is a legitimate question. It is no secret that Trump has been involved in bankruptcies in the past, and, to be sure, it is a legitimate question that remains unaddressed in the minds of many voters who are not entirely familiar with the particulars or history of this issue or the mechanics of bankruptcy law. A presidential primary debate is an appropriate forum to address the topic and allow the candidate an opportunity to explain the issue and provide clarity to potential supporters.

Trump’s response3)I will paraphrase though you will have to imagine my arms, parallel to the floor, moving toward/away from my body as I make my points was essentially that what he did was not illegal, but rather a legitimate business decision that was made by his companies to take full advantage of the laws available to them at the time, to allow them to move forward in the best way possible, and that it is something that has been done by other successful individuals and businesses many times. Furthermore, Trump has never personally filed for bankruptcy. All true.

 

What Mr. Trump can teach us about bankruptcy

Now is a good time to discuss the different kinds of bankruptcy that exist and who can file for bankruptcy. First, the law treats corporations and other business entities like trusts, LLCs, etc. as a distinct and separate legal entity than the person or persons that own the business. In other words, as far as the law is concerned, a corporation is its own fictional “person” with many of the rights, powers, and liabilities that a regular human being4)no word if the state control the reproductive rights of corporations, stay tuned has. Creating a separate legal entity allows an individual, or many individuals, to have an ownership interest in a business venture that exists separately from their personal lives. The business may own property and bank accounts for example, or it may enter into contractual agreements like obtaining loans where the business is the sole liable entity. Obviously, there are some differences between individuals and business entities, however, the key point here is that a corporation has the ability to file for bankruptcy for debts that belong to the business.

Further, there are three primary types of bankruptcy which are distinguished by referring to the different “chapters” of the law that allow for the bankruptcy processes to occur: Chapter 7, Chapter 13, and Chapter 11. The first two typically involve bankruptcies for individuals, while the third, Chapter 11, typically is used by business entities wishing to reorganize their debt and continue moving forward with business operations.

Just because an individual or a business has filed for bankruptcy, does not mean that the finances are doomed for the person or business that is filing for bankruptcy. Nor should it mean that society necessarily attaches a negative stigma to the bankruptcy filer. Several of America’s most celebrated entrepreneurs and leaders have filed for bankruptcy including Henry Ford, Walt Disney, Abraham Lincoln, and Thomas Jefferson5)Source. All of these individuals went on to achieve great things after going through the bankruptcy process.

In most recent time, the Los Angeles Dodgers6)#Doyer famously filed for Chapter 11 bankruptcy in just 20117)Source. Today, the Dodgers are doing so well financially that they have the top payroll in baseball8)Source, and it is not even close. The next highest payroll team in Major League Baseball is the New York Yankees who pay their players approximately $53.5 Million less than the Dodgers pay their players per year. Suffice it to say, the Dodgers are doing just fine financially, not just in spite of their bankruptcy, but probably partly because of their bankruptcy.

Donald Trump, meanwhile, has never filed for personal bankruptcy. This means that his personal bank accounts, investments, home, cars, and other assets were not part of the bankruptcy analysis in the bankruptcy cases that were filed by companies in which he had an ownership interest. The four times in which companies that he had an ownership interest in filed for bankruptcy, the filed for Chapter 11 reorganization bankruptcies, similar in many ways to the bankruptcy filed by the now financially affluent Los Angeles Dodgers. Trump has seen his companies grow and benefit from the bankruptcies and he estimates his own personal net worth to be in excess of ten billion dollars9)according to him. Bankruptcies or no bankruptcies, such a staggering accumulation of wealth is an impressive accomplishment to say the least.

 

Was Chris Wallace out of line to question Mr. Trump about his bankruptcy filings?

Let us return to Chris Wallace’s original inquiry and Donald Trump’s response. After Trump’s answer that it was his businesses that filed bankruptcy pursuant to applicable law, Wallace, would not let the issue rest, and bizarrely went on the attack, pushing the issue and highlighting the money lost by lenders to the business. What seemed to be pushing Wallace was an underlying sense that the bankruptcy filings were immoral and that it was a process that was unfair to various lenders that had loaned money to the company. What was missing, however, was an understanding that these lenders made a calculated business risk when loaning money to the company. Yes, the lenders to Trump’s businesses lost money…and so did the company and Trump himself on a certain level. However, any entrepreneur can tell you that anytime a business undertaking with such high stakes is taken, high risks are closely tied to the potential for high rewards. Even the stock market itself is the essence of investment in businesses for the potential of high returns, but it comes at the cost of a risk of loss. What the bankruptcy process involved was a way to allow the business to restructure some of its debt in order to maximize its profitability going forward and to allow all creditors of the business to obtain a fair and equitable solution to the dire financial circumstances that were facing the company. Creditors are intimately involved in the Chapter 11 bankruptcy process, even to the point of allowing them to vote in favor of a plan on how the bankruptcy case is going to be carried out.

There might be many reasons why a person would choose not to vote for Donald Trump. However, the fact that he has owned companies that have filed for bankruptcy, usually as a result of a shrewd business strategy, should not be one of those reasons. If anything, it highlights an awareness of the benefits of the various laws available to business owners and an ability to overcome tough financial circumstances.

 

 

Footnotes

Footnotes
↑1 Brian was kind enough write up a debate recap in case you missed it
↑2 or as close as he could get
↑3 I will paraphrase though you will have to imagine my arms, parallel to the floor, moving toward/away from my body as I make my points
↑4 no word if the state control the reproductive rights of corporations, stay tuned
↑5 Source
↑6 #Doyer
↑7 Source
↑8 Source
↑9 according to him
Bankruptcy / General Interest / Politics - 09/08/2015
Clear Counsel Law group

What we offer

Contact Info

1671 W Horizon Ridge Pkwy Suite 200,
Henderson, NV 89012

+1 702 522 0696
info@clearcounsel.com

Daily: 9:00 am - 5:00 pm
Saturday & Sunday: By Appointment Only

Copyright 2019 Clear Counsel Law Group® | Nav Map

Nothing on this site is legal advice.