Donald is known for his real estate ventures, television shows and recently, political ambition. He’s come to be one of the most easily recognizable celebrities with a flashy style, iconic hairdo and straightforward manner. But did you know Trump has filed for bankruptcy four times?
And he’s not the only one. Plenty of celebrities from Mike Tyson to Francis Ford Copolla have filed for bankruptcy, be it personal or corporate. It leaves us with a common conundrum: “How can someone known for having so much wealth seemingly go broke so many times?
Personal vs. Business Bankruptcy
There’s an important distinction to be made. Trump has never actually filed for personal bankruptcy. Instead, four of his businesses have filed for Chapter 11 bankruptcy.
Taj Mahal was the first in 1991 and was followed by the Trump Plaza Hotel the next year. After over 10 years of general stability, the Trump Hotels and Casino Resorts filed in 2004 and the Trump Entertainment Resorts in 2009.
Trump claims his personal finances were only involved in the Taj Mahal Chapter 11 bankruptcy filing. This is the reason Trump has been able to come out on top after multiple filings. Not involving his personal finances in the corporation’s operations protected his own bank account from total ruin.
Trump understands the difference between business and personal bankruptcies quite well. If you run your own business, it’s important that you do too.
Filed by a business or an individual in the case that business-related debts cannot be paid. Corporations and partnerships, in which the entities are separate from the owners, may file for Chapter 7 or Chapter 11 bankruptcy.
Sole proprietorships, in which the owner is legally responsible for business-related debts, may file for Chapter 7, Chapter 11 or Chapter 13 bankruptcy.
Filed by an individual in the case that personal debts cannot be paid. Individuals typically file for Chapter 7 or Chapter 13 bankruptcy.
It appears that filing for bankruptcy actually paid off for Trump in some ways. He was able to eliminate and restructure some of the debt owed by his businesses. He safeguarded his own resources by allowing the corporations to take the major risk of loss.
Perhaps most notably, all of Trump bankruptcies were filed under Chapter 11. This strategy allowed the Atlantic City businesses to stay in operation while the remaining debts to banks, employees and lenders were restructured.
And in the end, Trump was able to drum up repeat businesses by persuading lenders of the potential of his new ventures. Today, his net worth is an estimated $4.5 billion, and he boasts an annual salary of $250 million.
Lessons to Be Learned from Trump
While filing for bankruptcy is something we’d all like to avoid, there are some lessons to be learned from Trump’s forays:
- Make long-term goals for your business’s success
- Keep your personal and business finances markedly separate
- Analyze your career’s long-term potential
- Trust in legal advisors for counsel
The last lesson is especially important. Without experienced legal advisors, the results of Trump’s bankruptcies might have ended up another story altogether.
If you’re considering filing for bankruptcy on behalf of your business, consult Tyler, Bartl, Ramsdell & Counts Law Firm. Our firm has counseled countless individuals and businesses in bankruptcy matters for over 25 years. To safeguard your financial future, give us a call today at (703) 549-5000 to schedule a free consultation.