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Think Trump’s Bankruptcies Make Him Unqualified? That's Foolish

The opinions expressed by columnists are their own and do not necessarily represent the views of

I’m sick of hearing media ‘experts,’ political pundits and citizens bash business people for things that are perfectly moral, ethical and legal because they have no acumen or experience in any of the subject matter. They’ve never paid a payroll, run a business, or dealt first-hand with operating a business. They are simply spewing useless garbage out of their mouth, as a result of their abject ignorance.


I’ve had hundreds of Tweets and Facebook comments bashing Donald Trump for his four business bankruptcies. This bothers me; not because I want people to support Mr. Trump, but because it reveals a level of stupidity and ignorance that is scary.

Donald Trump’s first business bankruptcy was The Trump Taj Mahal in 1991. He gave up $1 billion in personal investments and half of his equity in the business to satisfy his personal guarantees. After all of his personal guarantees were paid back to the bank, the casino company went through Chapter 11 Bankruptcy and emerged. What would Trump bashers have preferred he do? Wipe out everything he owns, pay off all the debt, fire everyone and close the casino down? That’s foolish. But, if you bash Trump for this bankruptcy that is exactly what you are suggesting. On the debate stage, Trump has said this about his use of bankruptcy code for his casinos: "I'm in business. I did a very good job.”

Trump again invested millions of his dollars to acquire Trump Plaza Hotel in 1992. Again, it entered financial trouble and he gave up a substantial portion (big losses for him) of his investment and complied with the banks’ demands to cede control to another party.

Trump Hotels and Casinos Resorts in 2004, which was majority-owned by people other than Trump, filed for chapter 11 bankruptcy. His stake was cut nearly in half. At the time, he told the Associated Press that the company represented less than one percent of his net worth.


Trump Entertainment Resorts in 2009 was the fourth infamous Trump bankruptcy. He lost the majority of his investment resulting in less than a 10 percent stake in the emerging business.

Each of these cases have a common theme. Donald Trump used his name to brand property investments with a host of other investors and managers. He invested over $1 billion in these properties which he later surrendered to banks to cover personal guarantees and satisfy the banks terms. Chapter 11 bankruptcy is a reorganization process. This form of bankruptcy is commonly used in business to allow an orderly and fair process to pay creditors and keep the business open. In many cases, the banking institutions behind the troubled debt prefer businesses to follow this route as it is managed by a federal court and provides certain tax benefits to all parties. This process is anything but running away from your debts.

An example of business bankruptcies is found in the airline industry. If you’re foolish enough to bash Trump for keeping the businesses open through reorganization bankruptcy, perhaps you’re just confused. Let me explain how. Remember when Aloha Airlines filed Chapter 7 bankruptcy in 2008, ceasing operations, leaving passengers stranded and many ‘out in the cold’ with tickets they had already purchased? Chapter 7 is what happens when the business is liquidated and closed, most unsecured debts don’t get paid and the secured-lenders get pennies on the dollar, if anything. Maybe you thought Trump did that?


By contrast, Delta, United and American Airlines have all filed chapter 11 bankruptcy in the past 15 years. All three are now impressively profitable and employee a total of 246,000 people. So if you think we should judge any executive who took those three airlines through rough market turmoil and reorganization, which ultimately saved them from liquidation (chapter 7) bankruptcy, then you are foolish.

A corporation is a separate and legal entity. It may bare the name of a person, but it is not the person. Business people set up corporations to protect their family from unexpected market turmoil such as experienced in the Financial Crisis of 2009. Trump’s casino adventures were ultimately just property investments; not his company. Let me explain.

Prior to selling it, I operated a corporation in which I held 100% of the equity. Inside that corporation, it operated several limited liability companies (LLC). Some had my personal brand name. Some did not. My corporation (which was 100% owned by me) would own a percentage of each of these new companies with partners.

Our one mistake with these companies? We had personal guarantees on some of the debt. Had I not allowed banks to manipulate us into those personal guarantees, those entities could have survived through Chapter 11 restructuring. Instead, we closed or consolidated those affected LLC’s to protect the personal guarantors from further liability.

The point here is that Trump quickly learned to keep the personal guarantees away from the businesses so he wouldn’t be forced to conflate his personal interests with that of his partnerships. Keeping them separate helped the businesses continue.


Aside from my personal home, I’ll never sign a personal guarantee on my businesses again. The business can use it’s own balance sheet and profit-and-loss statement to secure financing. Ultimately, my businesses are investments. I’ll invest my cash into the business, which puts it at risk, but I will not put my families’ assets on the line outside my initial investment. If you think there is something wrong with that, you’re foolish. If you haven’t done it, don’t bash those who have.

Banks don’t play fair. When they have all the leverage, they will take all or more than they are owed at the absolute worst time.

Trump has learned that lesson. He’s not foolish. Bash him for the reorganization of companies, baring his name through chapter 11 bankruptcy, you’re the fool.

Don’t wish to vote for him for any other legitimate reason? That makes you an American.

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