Did Donald Trump Really Go Bankrupt?

With the announcement of the real estate mogul’s bid for the United States presidency, Donald Trump’s life and finances have come under scrutiny. While there are many issues to be raised with an exceptionally rich man running for President in a country suffering from the biggest wage gap and wealth inequality in history, the issue of bankruptcy surfaces repeatedly. Critics point out that Trump declared bankruptcy four times. Trump says that he has never gone bankrupt. Wherein lies the truth?

Man and Entity

The key issue here is to discriminate between Donald Trump the man and Donald Trump the business entity. As a living, breathing person running for presidency, Donald Trump indeed never filed for personal bankruptcy. His net worth of close to 3 billion dollars remains unblemished. However, Trump’s business did file for bankruptcy four times – in 1991, 1992, 2004 and 2009. All of these bankruptcies were related to properties in Atlantic City, primarily the over-leveraged casinos owned by Trump’s business.

Immune

That is not to say that Trump never felt the blowback. During the first bankruptcy in 1991, he had guaranteed a portion of the debt with his own assets and was forced to repay it out of his own pocket. For Donald Trump, this meant parting with some $900 million worth of assets, including an opulent yacht, private airline and stock in several businesses. Ever since, Trump has adopted a hands-off approach – all debt taken out by his business is insulated from him and his assets. Whatever happens to them does not affect him and his fortune.

Just What Happened in Atlantic City?

Examining the four bankruptcies does highlight an interesting question. While even a single bankruptcy is a life-changing event for both individuals and businesses, Trump’s businesses in Atlantic City seem to consider it par for the course, a part of routine business activity. Of course, the affected properties never entered Chapter 7 bankruptcy and liquidation – no, they entered Chapter 11 bankruptcy, which focus on a restructuring of the debt and creating a repayment plan to satisfy the creditors. All four bankruptcies were Chapter 11 bankruptcies, allowing the businesses to realign and revamp themselves without losing their ability to conduct business.

Is Bankruptcy Supposed to Work That Way?

This crucial question remains unanswered. According to Trump, restructuring a business repeatedly under Chapter 11 is simply taking advantage of existing corporate laws for your benefit. However, professional lawyers disagree. Bankruptcies are designed to allow debtors a second chance, to restart their efforts without the burden of debt or at least allow for a last-minute modification of the repayment plan to remain solvent and continue doing business. In the case of Donald Trump, mogul and billionaire, this second chance became the third, fourth, and fifth respectively – far more than the average American citizen is likely to see in his life.

However, for all intents and purposes, whenever Trump says he never went bankrupt, he is technically correct – he never went personally bankrupt, which is more than millions of Americans can say.


Bankruptcy can happen to anyone at any time, for any reason. Before you do anything, talk to our attorney at Van Horn Law Group about the best option for you and your situation.

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Chad Van Horn

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