Making Bankruptcy Work….The Donald Trump Way

The campaign for the presidency of the USA generated a lot of heat and dust. One of the issues that was raised repeatedly is the many bankruptcies that now President Donald Trump has undergone. One of the questions that appears to amaze a lot of people is how he  is still a billionaire after having gone through four bankruptcies.

The answer is quite simple. Donald Trump has NEVER declared bankruptcy.

Astonished?

Don’t be. The details are important. Donald Trump has never declared personal bankruptcy. Instead, the organizations of which he has been a part owner through his shareholding have declared bankruptcy under Chapter 11. That technicality is very important and sometimes overlooked in the heat of the debates.

Corporations are quite distinct from the person or people who form them and are treated as such by the law. Therefore, when Trump Hotels and Casino Resorts filed for bankruptcy in 2004, it was the company that owed people money and not  the man himself.

Companies filing for bankruptcy isn’t necessarily a bad thing. In the case of Trump Hotels and Casino Resorts, filing for bankruptcy allowed the company to renegotiate some or all of the terms of the debt it owed to various creditors thus allowing it to continue doing business. Why was this a good thing? Probably because had the company been liquidated, the creditors would’ve received far less than they did under the terms of the bankruptcy agreement.

There are many who feel that to be President Donald Trump has misused the bankruptcy laws to increase his wealth and escape his obligations to other concerned parties but the law itself is well intended and has a solid foundation. Bankruptcy laws were created to allow companies to continue functioning while they looked for ways to reduce their debt. Doing this is the best course of action in many cases because a functioning company has assets which generate cash and are worth more while in business than if they were to be liquidated.

For more information on Bankruptcy Law, Click here.