Donald Trump has recently been under attack for filing bankruptcy. I would like to take this opportunity to defend him and our bankruptcy system.
Trump has stated, “I have used the laws of this country…the [bankruptcy] chapter laws, to do a great job for my company, myself, for my employees, for my family.” see CNN article.
I believe that there is a common misconception in our country about bankruptcy. Many people believe that it is a system that rips off creditors and that anyone can do it anytime they want.
The truth about bankruptcy.
The truth about bankruptcy is that our system facilitates the distribution of assets to the creditors that deserve it the most…..the secured creditors. Secured creditors either get to take back their collateral or get paid in full at a reasonable contract rate. If there were no bankruptcy system, the only choice for a secured creditor would be to take back the collateral. Many times, after a house gets foreclosed, the bank is not able to resell the house for what is owed on the note. It is the same thing with cars. Have you seen how much cars sell for at an auction? Typically, it is half of the true value.
Who gets left holding the bag after a bankruptcy?
Yes, it is true that many unsecured creditors (credit card companies, medical bills, signature loans) get eliminated in bankruptcy. However, if there were no bankruptcy system, they would still not get paid any money.
Our bankruptcy system is an orderly system with checks and balances. Trustees are vigilant about checking a debtor’s income and assets. If someone misreports their income or assets, the debtor can get into serious hot water. In extreme cases, the debtor may end up a jail. The reason this does not happen 99.9 percent of the time is because debtors are broke. That is why they filed in the first place. Any available assets have already been sold to try to avoid bankruptcy.
All bankruptcy petitions are signed under oath. Bankruptcy judges will not hesitate to lower the boom on anyone who commits perjury.
Many critics of bankruptcy will say, “it is evil not to pay your creditors.” If someone actually has the ability to pay their creditor and just refuses because they are a stinker, I would agree with this statement. However, people who have the ability to pay their creditors in full at contract interest don’t file bankruptcy!
Is the person who files bankruptcy after going through a nasty divorce and was left with a huge pile of bills evil? I think not.
Is the person who just went through a cancer battle evil for filing bankruptcy? I think not.
Is the person who suffered a job loss because his factory was shut down evil for filing bankruptcy. Absolutely not!
Is our bankruptcy system perfect? Of course not. There is no such thing as a perfect system.
Warning! I am now about to go on a tangent. Keep reading. It will all make sense by the end.
I believe I am the chief among sinners. I have a sinful past. The good news is that if Jesus can save a wretch like me, then there is hope for everyone. You may be asking, what does this statement have to do with bankruptcy? The answer is grace.
I love grace. I need grace.
Our bankruptcy laws were created by the founders of our nation. They believed in grace. For this reason, bankruptcy is part of the United States Constitution. What inspired them to create a bankruptcy system? You may be shocked to learn the answer to this question. The Bible. That’s right. The B-I-B-L-E. Check it out for yourself. Read Deuteronomy Chapter 15.
Donald Trump is not the only famous person who has filed bankruptcy. Many famous people throughout the history of our nation have used the bankruptcy laws to get a new start. Abraham Lincoln, Henry Ford, Walt Disney, Larry King, Dave Ramsey, and Kim Bassinger. I’m glad all of these people were able to get a fresh start.
Thank you Lord for Grace!
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3. How much does it cost to file?