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 San Jose Business & Commercial Law Blog

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Bankruptcy Offers Protection and the Opportunity to Restructure a Business

The term "bankruptcy" is loaded with meaning. When reading it, one might conjure images of a dream gone bust, a life gone wrong, and a hopeless future. Such a grim picture simply does not square with reality, however. The truth is that many individuals and businesses that choose to go through the bankruptcy process go on to experience great success in life and in business.

Take, for example, Donald Trump, the current President of the United States. Prior to being elected, Trump had filed for bankruptcy. Not only that, but Trump's companies filed for bankruptcy six times. This fact alone illustrates that bankruptcy is by no means inconsistent with prosperity. Importantly, however, one must be strategic and well-prepared in the bankruptcy process, working with an experienced San Jose bankruptcy and business law attorney every step of the way.

There Are Three Chapters of Bankruptcy

Broadly speaking, there are three types (or "chapters," as they are referred to in finance) of bankruptcy: Chapter 7, Chapter 11, and Chapter 13. Of these three options, Trump's companies have elected to file for Chapter 11 bankruptcy protection. Note the word "protection," here, and work to adjust your preconceptions of bankruptcy accordingly.

Under the protection of Chapter 11 bankruptcy, a company can remain active in business while shedding many of its debts. How is this possible? It's really about mutual benefit - about facing reality and doing what is best for both a business's owners and shareholders.

It stands to reason that owners and shareholders might not see eye to eye on priorities when a business is in financial dire straits. As such, a bankruptcy court functions as a mediator, reviewing and finally approving a corporate budget and financial plan for the business to repay remaining debts (those not wiped away by the power of the bankruptcy court).

While shareholders often lost some equity, the loss is partial rather than total. This is not a perfect ending, of course, but certainly a preferable one to preventing a business from restructuring and continuing on in business.

The Importance of Professional Expertise in Matters of Bankruptcy

Hopefully, your perceptions of bankruptcy have changed over the course of learning details about the business travails of the current President. If you are considering bankruptcy, an experienced San Jose business law attorney can help by analyzing the specifics of our situation, providing counsel, and working to carefully take the right steps for you and your business in the bankruptcy process.

Source: https://www.washingtonpost.com/politics/2016/live-updates/general-election/real-time-fact-checking-and-analysis-of-the-first-presidential-debate/fact-check-has-trump-declared-bankruptcy-four-or-six-times/?utm_term=.014eb82c8105

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