It has always bothered me a little that consumer bankruptcy clients who come to see me about filing for bankruptcy in Utah feel so much shame about considering bankruptcy, where, on the other hand, business icons do it all the time. The stigma that follows filing bankruptcy is palpable. My clients often feel that they have failed, and want me to know that they are not irresponsible people.
“I’m not a bad person, I’m not trying to screw my creditors, I just can’t keep up.” I could wallpaper my office with original Picassos if I had a dollar for every time I heard it.
I understand, and admire, these client’s sense of integrity. But I wish they would view their personal bankruptcies like world-class entrepreneurs do: as a business decision.
Raise your hand if you knew that Donald Trump has filed for bankruptcy FOUR TIMES!
Now, it is true that Donald Trump’s four bankruptcies were corporate, not consumer, bankruptcies. But does that really make a difference? Consider the explanation of how Donald Trump is able to file bankruptcy over and over, and yet remain wealthy, and retain at least enough respect and adulation to make a serious run at a United States presidential campaign.
Reason #1 – Trump’s bankruptcies are used as a business tool.
In each case, Trump filed for bankruptcy due to over-leveraged casino hotel resorts in Atlantic City. Is it somehow more honorable to file bankruptcy as a tool to fix a failed business plan, than it is to fix a failed personal finance plan? Don’t the best consumer finance advisors tell us to run our personal finances like a business? Don’t we invest our personal nest-eggs in real estate, stocks and bonds – just like corporations do?
If corporate bankruptcy is to be looked at as a business tool, how should consumer bankruptcy be any different?
Reason #2 – They did it too!
When confronted about his bankruptcy history, Trump has been quick to point out that many other world-class entrepreneurs have also filed bankruptcy. But this shouldn’t make you feel any different about your own personal finances. Any elementary school teacher will tell you that “they did it too” does not absolve you of responsibility. But even if it did, couldn’t consumer bankruptcy filers say the same? Everyone reading this article has several friends who have filed bankruptcy, whether they know it or not; it is, after all, not exactly the kind of thing people like to tell each other.
Reason #3 – His creditors knew what they were getting in to.
Trump and his apologists will tell you that the creditors that loaned him money knew that there was a risk involved. They were well aware of Trump’s personality, and aggressive business style. They took a calculated risk, and it didn’t pan out.
True, but how are you any different as a consumer? Credit card companies, pay day loan companies, mortgage lenders and health insurers alike all know the risks of lending you money. That is the function of credit reports and income verification. When Discover Card, for example, gives a person a credit card, they base the interest rate and credit limit on the person’s financial history. They expect a number of these risks to fail, and those failures are baked-in to their numbers. They know what they need to recover to make a profit, and they lend consumers money accordingly.
So how are consumer creditor’s calculated risks different than the risks Trump’s creditors took?
A word on personal responsibility.
There is also a big difference between spending irresponsibly, and getting yourself in to a hole that you have to file bankruptcy to get out of, on one hand; and being thrown in to a financial meltdown by forces outside of your control such as economic turns, job losses, and health problems. The later are not examples of irresponsibility so much as they are of misfortune. So why should we lump them together?
Almost all of my clients, by the way, fall in to the later camp. They are forced in to bankruptcy when a financial tragedy strikes their lives. If you find yourself in this position, give my office a call so that we can help you! Bankruptcy is a right spelled out in the Constitution, just like free speech; and according to Donald Trump, it can be a very helpful business tool as well!