King Law Center

Pennsylvania Bankruptcy Attorney

Trump and Bankruptcy — August 8, 2015

Trump and Bankruptcy

imagesLook, Donald Trump is a boob, period. He has no chance to do anything in this election other than embarrass himself further, and that’s fine. But I will stick up for the guy on the bankruptcy front. Chris Wallace asked┬áThe Donald about his business bankruptcies in a real accusatory way, as if filing for bankruptcy is evil or makes one unfit to run a business (or nation). The fact is, Chapter 11 is nothing like consumer bankruptcy. It’s a request for court protection from creditor action so the business can reorganize itself, and then, presumably, go on operating when the reorganization plan is approved by the relevant players.

When a Chapter 11 is filed, creditor activity is stayed, just like Chapters 7 and 13. This avoids and timing issues with the creditors arguing “but we sued first,” etc. Then, the business negotiates with its creditors with an eye to fixing itself somehow some way to end the bankruptcy and go back into business. A simple example would be that a business might seek to repay its creditors over 10 years instead of the 5 years left as was written on the original repayment contract. This is better than just shuttering the business, no?

The fact is, Chapter 11 is regularly argued to be GOOD for innovation. It’s not necessarily good for the investors or creditors, but that’s the nature of investment: it’s risk. But the opportunity to pull the plug promotes entrepreneurship; it allows the inventive to invent, to probe the marketplace…and, importantly, to be able to try again without being weighed down by debt from an earlier venture. I’m not privy to the facts about the Trump bankruptcies. I just don’t like the idea that the word is somehow an anathema. It shouldn’t be. Do some more research next time, Mr. Wallace.

Don’t Commit Perjury (Or Sue Your Lawyer Afterwards) — August 1, 2015

Don’t Commit Perjury (Or Sue Your Lawyer Afterwards)

teresa-giudice-prison-lies-daughtersDon’t commit perjury in your bankruptcy case or you, too, could get a nice orange jumpsuit. True, orange is the new black and black goes with anything, so there’s that upside. Plus, you get free food thrice a day and a roof over your head when it rains, so maybe it’s not all that bad. The point is, don’t lie. You can face penalties that include time in the slammer. You could, of course, in an attempt to deflect true blame, sue your lawyer afterwards. The problem is: the lawyer doesn’t sign under penalty of perjury, debtors do. A lawyer does have legal responsibility, of course; and he/she should. But the lawyer’s duty does not extend to making sure what is in the petition is factually correct. Consider if all bankruptcy attorneys had to independently verify the list of assets in Schedule B, for instance. How would this be done? A walkthrough of the debtor’s home? Why wouldn’t the debtor simply hide the diamonds behind the tarragon in the spice rack until the lawyer left? Or park the Lamborghini down the road for a bit? The fact is, a lawyer cannot, and should not, have to independently verify anything. This is why the forms say — correctly — that the obligation is the debtor’s. A lawyer performs legal work. Legal work is not creating a list of assets. So, be smart: no bankruptcy is worth going to jail for.