Why can professional athletes, movie stars, singers, and other wealthy celebrities file for bankruptcy and often give up little or none of their property? By contrast, if you or I file bankruptcy, we may have to give up our house or car in a Chapter 7, or we may find ourselves living under a very restrictive Chapter 13 budget.
As I discuss in this video, the United States Bankruptcy Code applies the same to everyone, but wealthy businesspeople and celebrities have two advantages that you and I do not.
First, a wealthy debtor who owes millions or tens of millions of dollars actually has a great deal of leverage when it is time to negotiate with banks. If you owe a bank, even a large bank, $30 million, that bank does not want to see you going out of business. A $30 million loss would likely impact that bank’s liquidity ratios and might cause the bank to go out of business.
So if you owe millions of dollars to a bank, management will almost always offer to negotiate an extended repayment and restructure of the debt.
A bankruptcy reorganization allows banks and other creditors to participate in the design of a repayment plan that will allow the debtor to remain in business but also to pay down debt over time.
Secondly, a wealthy debtor often has the opportunity to earn large sums of money quickly. Actors, singers and professional athletes can go on tour, star in a movie or endorsement deal and within a short period of time generate tens of thousands of dollars.
In these cases, the debtor just needs time to line up a new opportunity and the automatic stay of bankruptcy can provide that time.
By contrast, you or I most likely do not owe enough to prompt banks and other lending institutions to the negotiating table. Whether you reorganize or liquidate just does not matter to them so you or I would have very little leverage inside or outside bankruptcy.
You may not be a wealthy celebrity but you can still derive benefit from bankruptcy if you are facing unmanageable debt. Call our office at 770-393-4985 to learn how bankruptcy might be a solution to your financial problems. #donaldtrumpbankruptcy #bankruptcyforrichpeople #atlantabankruptcy
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