Donald Trump’s Bankruptcies Spark National Debate on Chapter 11

Posted on November 13, 2015 at 12:00pm by
after filing for bankruptcy

The 2016 Presidential Election has provided the American people with a unique opportunity to discuss bankruptcy law. For those who need to catch up on current events, we have recently written about candidate Donald Trump’s companies filing for bankruptcy four times.

During the Republican debates on October 26th, it was suggested that Donald Trump should feel bad about his companies filing for Chapter 11 bankruptcy. A host of the debate called bankruptcy a “broken promise”.

Business Owner’s Nightmare: A World without Chapter 11 Bankruptcy Protections

While we cannot speak on Trump’s political or ethical stances, it is unfair to claim business owners should feel unshakable guilt for life when their businesses file for Chapter 11 bankruptcy. Donald Trump is not the only business owner in America who has used Chapter 11 bankruptcy protections.

Without Chapter 11 protections, businesses could face situations where paying debts are near impossible. Debtors would have no protections against lawsuits and other consequences. Debt problems could become permanent with no available solutions for business owners.

We can take a glimpse into what this scenario might look like by observing student loans, which are traditionally more difficult to discharge in bankruptcy than other debts. In the case of student loans, borrowers in default see debts continuously grow as their wages are garnished and credit ratings permanently destroyed.

Chapter 11 protections allow businesses to refinance burdensome debts, keep doors open and attain another opportunity for becoming profitable. As debtors-in-possession, business owners can slash debts and continue to operate, which means they can continue to make money, some of which can go towards paying back creditors.

People make mistakes, and sentencing business owners to a lifetime of unpayable debt would be a great injustice.

The Sader Law FirmKansas City Bankruptcy Attorneys



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