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Small business bankruptcy lessons from a billionaire

Some people associate business bankruptcy with failure, but this is far from the truth. Donald Trump's net worth has been reported as somewhere between $4.1 billion and $8.7 billion which is hardly a sign of a failure. Yet, Trump, who has never filed for personal bankruptcy, has seen four of his business ventures file for business bankruptcy.

The Chapter 11 filings allowed the billionaire to engage in business debt negotiations that resulted in new, more favorable terms being worked out with creditors. Whatever concessions Trump was forced to make does not appear to have hurt his personal wealth, and the companies involved in each business bankruptcy underwent a business reorganization that allowed them to continue operating.

While most business owners are not operating on the same scale as Donald Trump, they can learn from his business bankruptcy experience. Small business bankruptcy can be a strategic maneuver when cash flow fails to meet a company’s financial obligations and operating expenses. This is particularly true when creditors are threatening legal action and refusing to voluntarily engage in business debt negotiations.

A Chapter 11 bankruptcy may allow a business owner the opportunity to force creditors to give more favorable debt terms through business debt negotiations. If successful, the company’s assets are protected and the business continues in operation.   

Deciding whether business reorganization is right for your company requires the guidance and legal advice of a Cincinnati, Ohio, bankruptcy attorney. A small business owner could benefit from reviewing the company’s financial statements with an attorney to determine the best course of action to deal with creditors.

Source: Vanity Fair, “4 Times Donald Trump’s Companies Declared Bankruptcy,” Bryan Hood, June 29, 2015

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