First, let’s set the record straight. Donald Trump, the man (and Republican Party presidential candidate), has never filed personal bankruptcy. On the other hand, his casino business has filed for Chapter 11 reorganization in bankruptcy a record four times in the past 30 years! While it is legal for corporations to file for bankruptcy, and they often emerge stronger, keeping key employees and business, it certainly raises some questions about the chief executives’ ability to manage a large entity successfully. Furthermore, the debts owed to lenders, employees and creditors are either wiped out or reduced.
Trump’s assertion that “virtually every person that you read about on the front page” has used the bankruptcies laws may be a stretch. According to facts, fewer than 20% of large companies (over one billion dollars) have filed for reorganization in the bankruptcy court.
How Do Personal Bankruptcies Differ?
Personal Chapter 7 bankruptcies differ from the Trump-type business bankruptcies. For example, Trump’s Taj Mahal filed in 1991 and again in 1992 for Trump Castle Associates. Regular folks, thanks to the questionably named Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, can only file for personal bankruptcy once every eight (8) years.
In the 1991 filing, Mr. Trump had to give up his 282-foot yacht, which, while owned by the corporation, was essentially a personal vessel. While Trump complains that the creditors at that time were “total killers,” the largest creditor was Carl Icon, to whom Trump owed $400 million to, and now wants to make the United States Treasury Secretary. In the 1992 bankruptcy, Mr. Trump lost a hotel, but retained interest in his casinos. In a personal bankruptcy, such significant assets would not be allowed to be retained – they would be taken by the trustee.
In 2004, Mr. Trump discarded $500 million in debt in six months through a business bankruptcy. While he gave up control to a multiplicity of bond holders, he retained the distinction as largest single shareholder, which, in essence, gave him control of decision making. When personal bankruptcy debtors give over their properties to the United States Trustee, they don’t get to retain control of decision making.
Mr. Trump finally lost control and ownership of the casinos in Atlantic City in his 2009 bankruptcy filing when he could not make a $53 million bond payment. While the new owners have retained the Trump name, Mr. Trump has lost all ownership of the gaming hotels. How is this different? When our clients lose their property in a personal bankruptcy, we don’t recall having the Trustee ask if the name can be retained! Mr. Trump asserts that getting out of Atlantic City was a good business decision, but another business decision would be to sell a business for a profit. We are not commenting on who should lead the free world; just pointing out two possible outcomes for a business in New Jersey.
The irony is that the new owners of the Trump properties in Atlantic City themselves filed for bankruptcy in 2014…and Mr. Trump sued to have his name (finally) removed.
Donald Trump is Different from You and Me
Mr. Trump was fortunate enough to inherit a real estate company from his father; and smart enough to build it into an empire. While his television personality shows prove him to be entertaining, and his multiple casino bankruptcies show business smarts, it’s clear that what he does with the bankruptcy laws and what personal consumers use the bankruptcy code for are vastly different.
Call Bankruptcy Attorney Neil Burns for a Free Consultation.
If you have a question about a personal bankruptcy in Massachusetts, call Attorney Neil Burns at 617-227-7423 for a free initial consultation. He has 30 years of experience representing individuals and families in Massachusetts.