This year, Tennessee residents will participate in a national election to choose the next leader of the country. Over the last few months, Republican and Democratic candidates for the presidency have engaged in heated debates about issues that are important to local residents as well as the country as a whole. In the most recent debate between Republican hopefuls, one candidate was forced to discuss his involvement in the bankruptcy process.
During the discussion, candidate Jeb Bush suggested that rival candidate Donald Trump had filed for bankruptcy. Trump had to clarify the statements, noting that while he had not ever filed for personal bankruptcy, he had filed for business bankruptcy as a means of addressing the financial problems of entities. These comments made during the national debate highlight an important distinction between two very different types of bankruptcy.
Though as the head of a business Trump may have been in charge of the entity’s bankruptcy process, as an individual he was not liable for any of the business’s financial troubles. Businesses stand as their own legal persons if they are properly set up. This insulates individuals from business debts and protects an individuals’ assets from bankruptcy if a business suffers financial setbacks.
Personal bankruptcy occurs when a person cannot handle the pressures of his personal debts, whereas business bankruptcy occurs when a business must use the process to remedy its corporate, entity-based economic struggles. Recognizing the differences between these two forms of bankruptcy can be challenging when an individual and his businesses are as intertwined as Trump and his corporate projects, but each addresses the financial struggles of a different type of debtor.
Despite the negative connotation associated with bankruptcy, it is actually a very strong tool to help individuals and businesses seek a new financial beginning. Though many think of bankruptcy as an option reserved for those who are on their last leg, the Trump example proves otherwise. Bankruptcy can apply to a number of situations, which is why those facing financial challenges should consider speaking with an attorney about their debt relief options.
Source: kstp.com, “At GOP Debate, Trump Denies Accusations of Bankruptcy,” Feb. 14, 2016