During the recent Republican debate in Cleveland, Donald Trump stated that he has never filed a personal bankruptcy. However, his companies have filed for Chapter 11 bankruptcy protection four times in 18 years. How is this different from rapper Curtis Jackson, better known as “50 Cent,” who filed personal Chapter 11 bankruptcy earlier this summer?
Jackson’s Chapter 11 bankruptcy is a personal reorganization bankruptcy. The Bankruptcy Code allows an individual may file for financial reorganization under either Chapter 11 or Chapter 13. Both Chapter 11 and 13 stop collection activities while the individual formulates a repayment plan. In some cases the bankruptcy court may approve a plan to restructure or change personal debts. For instance, liens on secured property may be stripped off, interest rates changed, repayment times lengthened, and some debts may be paid “pennies on the dollar” or discharged without payment.
Most individuals seeking a repayment plan and reorganization of personal finances choose Chapter 13 rather than Chapter 11. Chapter 11 is a more complex bankruptcy process and is used primarily by businesses to reorganize (a company cannot file under Chapter 13). An individual, such as Mr. Jackson, is ineligible to file under Chapter 13 if the person owes more than $383,175 in unsecured debts (such as a personal judgment, credit cards, and medical bills), or more than $1,149,525 in secured debts (such as mortgages and car payments). Mr. Jackson reportedly owes in excess of $28 million.
On the other hand, Donald Trump avoided personal bankruptcy by incorporating his business activities. His first business bankruptcy, a 1991 case involving the Trump Taj Mahal in Atlantic City, left his business more than $3 billion in debt. Unfortunately, Mr. Trump himself was not completely insulated from this financial collapse. In exchange for a lower interest rate and more time to make loan payments, Mr. Trump gave up half his ownership and equity in the Trump Taj Mahal, and sold off personal assets.
During that time, Trump told The Washington Post that he passed a beggar in New York and said to his now ex-wife, model Marla Maples, “You see that man? Right now he’s worth $900 million more than me.”
If you are struggling financially, speak with an experienced bankruptcy attorney and discuss your financial strategies. The federal law can be a useful tool to reorganize business or personal liabilities and provide for a more successful future.
If you are considering filing for bankruptcy please call the experienced attorneys at Fears Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to fears@fnlawfirm.com.