How is Donald Trump Able to File for Bankruptcy So Many Times?
Written by James Hirby | Fact checked by The Law Dictionary staff
People might ask "How is Donald Trump able to file for bankruptcy so many times?" The answer is "He didn't." Trump himself has never filed for bankruptcy. His corporations have filed for Chapter 11 bankruptcy four times.
By filing for Chapter 11 bankruptcy, the corporation is allowed to continue running while restructuring and reducing its debt. By allowing the business to continue, employees still have their jobs and the business is still making money. Corporate debts still need to be repaid but they may be reduced. The corporation must develop a repayment plan and corporate budget. Both must be approved by the creditors and by the bankruptcy court .
A corporation is a separate legal entity from its shareholders, other owners, board of directors. and CEO. Since it is a separate entity, the corporation files bankruptcy under its own name. In Chapter 11 bankruptcies, the owners’ personal assets are not at risk. The owners’ credit history remains intact.
In 1991, Trump's Taj Mahal located in Atlantic City was in debt for billions of dollars. As a result, Trump's corporation filed for Chapter 11 bankruptcy. The Bankruptcy
court allowed Trump to reorganize his corporate debts and allowed the casino to keep operating. Trump did surrender half of his ownership interests in the Taj Mahal. He chose to sell his yacht and airplane to help make loan payments.
In 1992, Trump filed for Chapter 11 bankruptcy on his Trump Plaza Hotel in Atlantic City. At this time, Trump owed $550 million on the Trump Plaza Hotel. As part of the restructuring, Trump gave Citibank a 49% interest in the hotel. He was given a lenient repayment plan. Trump was able to stay on as CEO but he had to give up his salary.
Trump Hotels and Casino Resorts filed for bankruptcy in 2004. The corporation had $1.8 billion dollars of debt. Trump reduced his share in the company to 25% thereby surrendering his control of the corporation. The corporation received lower interest rates and another loan to upgrade the properties.
In 2009, Trump Entertainment Resorts filed bankruptcy after missing a large bond interest payment. Trump was not able to agree with his board of directors on a repayment plan so he resigned as chairman of the board and retained only a 10% ownership interest in the corporation.Source: thelawdictionary.org