Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “What is Chapter 11 Bankruptcy?”
The recent Republican presidential debate drew millions of viewers and nabbed headlines for a variety of reasons. One of those is because of a question that Donald Trump was asked about bankruptcy. Though many felt the question was intended to embarrass the notoriously egomaniacal businessman, Trump responded in a way that many experts agree with, by pointing out that those who seek legal protection from creditors should not be demonized or lampooned for having done so.
The question was asked by moderator Chris Wallace and dealt with Trump’s previous four bankruptcy filings. The issue was whether someone with such a spotty financial track record should be entrusted with running the country. Rather than apologize for filing Chapter 11 (the bankruptcies were all corporate, Trump has never filed personal bankruptcy), Trump defended his actions aggressively.
According to Trump, he did what any smart businessperson would have done. When faced with business deals that went bad and an inability to repay creditors, rather than allow his company to go under, he sought to restructure debts and live to fight another day. In doing so, Trump’s company exists today, employing thousands of people and creating millions of dollars in wealth, for Trump, for his employees and for those who continue to finance his new business ventures.
Trump also pointed out something that the moderator failed to mention. While his company sought bankruptcy protection four times, these instances are but a fraction of the overall number of deals he has entered into, with thousands of others ending profitably for himself and his creditors. The four bankruptcies represent four failures out of a record of thousands of successes. Should Trump be defined by the four or by the thousands?
Another important issue raised by Trump concerns the creditors and how much sympathy they deserve. The moderator made sure to point out the amount of money creditors lost on the four bankruptcies, placing the responsibility for the financial mess squarely at Trump’s feet. For his part, Trump noted that the creditors lending him money are far from mom and pop operations. These are major national and usually international financial institutions with wealth far greater than even Trump’s. These financial institutions are not lacking in sophistication and weren’t tricked into loaning the money. Instead, they made a bet that the deal would work out. This is exactly the same bet made by Trump. Most of the time the lenders (and Trump) were right. Some of the time, they weren’t. Is that all Trump’s fault? Certainly not. The lenders knew what they were agreeing to and what the risks of the loan were yet the decided to move forward. The lenders knew that he had declared bankruptcy previously and yet they continued to give money after his first, second, third and fourth filings.
Our society often sympathizes with creditors without thinking through the situation fully. Though losing money is never a good thing, most creditors are not unsuspecting victims. They were equal participants in a bet that didn’t work out. Just like they lost money on the deal, so did Trump. Something the moderators at the debate forgot to mention was that Trump had personally guaranteed many of those loans, putting hundreds of millions of his own money on the line. When the deal went bad, lenders lost money, but so did Trump.
Though bankruptcy isn’t something anyone would wish for, Trump raised important points about why it isn’t so terrible either. Lawmakers wrote the Bankruptcy Code for a reason: if there were no way out of financial failure, people would eventually stop taking risks. Without risks, economic growth slows dramatically. Bankruptcy allows people to take risks, create jobs and try new things by offering a way out of crushing debt. Trump saw that and took advantage of it and shouldn’t be demonized for doing so. The same goes for the millions of ordinary Americans who have had to do the same.
If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.
About the Author
Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.
Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.
In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.
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