I Filed For Bankruptcy At 21 – Here’s What I Learned

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You’ve probably heard that Donald Trump has had four bankruptcies, but what does that really mean? Let me tell you my story to really explain what bankruptcy is and how it can be one of the most powerful tools in business. Growing up, I had a somewhat unique situation. When I was just 19, my grandmother passed away, leaving me the owner of over 30 multi-million dollar properties in Santa Monica, CA.

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The problem with that was that the economy crashed a few months later, leaving me to hold the proverbial bag. I had no cash flow to support my business, but I had equity in units. Unfortunately, the rentals had simply stopped coming. People were staying in their current living situation or looking for cheaper housing alternatives. I tried to contact the mortgagees, but they wouldn’t talk to me because none of the loans were in my name. When I finally contacted them, they did not agree to modify the loans. Back against the wall, I decided that bankruptcy was the only option to protect my assets. Bankruptcy stops all foreclosure proceedings for a period of time by issuing what is called a “stay”. Essentially, the Louisiana bankruptcy attorney court protects you from your creditors.

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There are three main types of bankruptcy: Chapter 7, 11 and 13. Chapter 7 is normally filed in order to eliminate your debt. For example, if you accumulate debt Over time, you can file a Chapter 7 and all the debt will disappear, but your credit will be destroyed for about seven years. Chapter 13 is a personal reorganization plan. It allows you to restructure and pay off your debts to maintain the equity you have saved, which is normally in your home, but with a financial limit of $1 million. Chapter 11 is the most complicated of the three and allows you to restructure a large corporation or business in or under your name. Unfortunately for me, Chapter 11 was my only choice.

Here are seven things I wish I had known before declaring bankruptcy:

1. Hire the right lawyer.

It’s easy to go interview several lawyers and hear their every spiel about how they are the right lawyer for you. In reality, it’s up to you to ask the right questions and judge their answers. Good questions for me are “Have you ever had a bankruptcy like this before?” and “What’s the game plan for not just filing but coming out of bankruptcy as fairly as possible?”

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Unfortunately hindsight is 20/20, and I hired an attorney who had never filed a chapter 11 case before because he was cheaper than the alternatives and I wanted to save money. silver. In the end, I learned the hard way that cheaper often costs you more in the long run. Halfway through the case, we started losing every move, and it quickly became clear that this guy and his company had no idea what they were doing. Eventually I had to find a new attorney who was familiar with handling cases like this, and eventually that helped me out of bankruptcy. The worst part is, I interviewed her first and should have gone with her the first time, realizing the other lawyer was cheaper for a reason.

2. Know your judge.

Research your judge. Ask around to find out as much as you can and find out what they like and what they don’t like. All judges are different! Some prefer their documents a certain way with file tabs, some don’t. Every judge has their niggling little items.

Some judges are pro-creditors, some judges are pro-debtors. Pro-debtor means they tend to side with those who have declared bankruptcy, pro-creditor means they tend to side with those you owe money to. This information is extremely important to know what obstacles are in front of you and how you can overcome them. My first judge was pro-debtor, and he retired in the middle of the case. My second judge was very creditor friendly, which made my life a living hell.

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3. Create a business plan before filing.

Sit down and find a plan that would work for you. Type up an excel sheet for a plan, something to the effect that if you sell this right now, you can afford to pay your debts and you’ll have plenty left over. It can be quite complex, so ask your lawyer to guide you. I would also recommend talking to your attorney about how to structure it and if it’s doable.

4. File the bankruptcy petition with a plan ready to go.

Make sure your plan is completed as soon as possible. If the plan changes, that’s okay, as long as you have the right plan from the start. Time is the reason you should file a Chapter 11, but don’t overdo it and try to save time. As soon as bankruptcy is filed, it’s not the critical moment of the fourth quarter – it’s overtime and your team is down. Don’t waste the extra time you have been given.

5. Don’t play games with the bankruptcy courts.

The court, believe it or not, is there to protect you. Make sure you treat him with the respect he deserves. Don’t try to hide assets or certain purchases, as this could harm you in the long run and cause you to be denied your entire bankruptcy. Always be honest and upfront with the courts. Don’t forget to file your MORs (monthly operating reports) on time.

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6. Schedule downtime.

Hopefully, don’t forget to save some money. Everything has a lifespan. Plain and simple. You never know when the next economic meltdown might occur. I suggest saving as much as possible for downtime, even if it’s only a little. It’s always good to have reservations.

7. Use what you’ve learned.

Bankruptcy has been the most precious yet difficult moment of my life so far. But, through this, I feel like I learned a tremendous amount about how to properly forecast and assess my business and its future. My advice is to learn from your mistakes and do your best not to repeat them. Use your mistakes to become better. Plan better and stay ahead.

Bankruptcy can be one of the most valuable tools in business. Regardless of its negative connotation, it has helped build and rebuild some of the greatest financial empires to date. Don’t be afraid to file it – just make sure you do it right.

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