Let me give you an example of how the wealthy use bankruptcy:
Let’s say a corporation has assets worth $500,000. And it has debts of $1,000,000. This means the corporation is insolvant. The corporation balance sheet is negative by half a million dollars. If that corporation was your business, would you just walk away? Wealthy people often use bankruptcy to reorganize. A bankruptcy case might allow the corporation to keep all it’s assets, and shed half of it’s debts. The corporation continues in business.
How the wealthy use bankruptcy
This was an oversimplification. But it gives you the basic idea. Bankruptcy builds wealth. Bankruptcy is a financial tool. That’s how the wealthy use bankruptcy. Take an insolvent business. Let’s say it is a hotel, or a casino, or office building. They restructure the debt and then rebuild cash flow. That creates new wealth out of the extra cash flow that no longer is needed to service old debt.
You don’t have to be wealthy to make bankruptcy work for you. If you are an individual who is always broke, bankruptcy can bring you huge benefits. Bankruptcy can let you turn a negative net worth in a positive net worth. Almost overnight.
Do you own a home with a 2nd mortgage? You know, those home equity lines, “80/20 loans”, and loans like that? If your property is underwater, bankruptcy may allow you to “lien strip” the 2nd mortgage off your property.
Are you somebody who just can’t seem to get ahead? Your debts total way more than the value of your assets? Living paycheck to paycheck? If you have worrisome bills that you can’t pay, consider bankruptcy. Most bankruptcy lawyers are willing to give you a free consultation. All of your creditors have lawyers to advise them. Maybe you should have the same benefit. You can easily find out your own legal rights.
A simple Chapter 7 bankruptcy case may eliminate debts like credit cards, personal loans, and medical bills. Most people who file Chapter 7 bankruptcy will get to keep all of their assets. The categories of assets you will get to keep are called exemptions.