Question: I started a business and I think I need to file bankruptcy soon, just like Donald Trump did. I founded the business with a friend from Georgia Tech when we both got laid-off a couple of years ago. It's a technology company and we've tried raising money from friends, family and even some of our old college professors. And we've actually raised quite a bit of capital.
The problem is that we've spent all the money on product development, office space, Atlanta Braves, Hawks and Falcons season tickets, salaries of employees and paying ourselves. Not that we paid ourselves a lot of money, but I'll admit we took nice salaries and bonuses.
We tried to develop a product that would be very useful in the medical field. We projected huge sales domestically and internationally. Our projections showed the company making many millions of dollars a year. And we projected that it would go public within 7 years with an IPO. We had meetings with some venture capital firms here in Atlanta and some hedge funds.
The problem is that now that we've developed the product, it doesn't work. We did a lot of planning and testing, but the product doesn't actually work as we intended. It may actually harm patients. It was all a waste of time and money.
The business owes a lot of money and I put a lot of expenses on my personal credit cards. I put a ton of debt on my American Express and Visa cards. There's no way the business can succeed and I need to get rid of the personal debt and get a real job. I need to close the business so I don't lose any more money.
Please explain my bankruptcy options? I know Donald Trump filed bankruptcy and he's got 10 billion dollars and he's a presidential candidate, so I know that bankruptcy is used by some very rich and powerful people. I want to file bankruptcy like Donald Trump.
P.V. in Alpharetta
Answer: Donald Trump has indeed filed bankruptcy on several occasions. As a savvy and successful businessman, he understands that the bankruptcy laws are there to help businesses and individuals relieve heavy debt burdens. Mr. Trump has utilized these laws to help him eliminate debt and build a real estate and entertainment empire. Indeed, the right to file bankruptcy is in the United States Constitution.
The good news is that just as Mr. Trump and other very wealthy and famous people have filed for bankruptcy, so can you.
Bankruptcy is available to both businesses and individuals. In fact, both people and businesses can file the popular option of chapter 7. There are, of course, other bankruptcy chapters (like chapter 13) that can also be utilized depending on the specific facts and circumstances of the company or individual.
If a person files chapter 7, that filing should eliminate all of their unsecured debt. So debts from credit card bills, hospitals, doctors and other medical professionals, personal loans, evictions and repossessions can all be discharged.
Many small-business owners have to personally guarantee business debt. Many times they put it on a personal credit card or they will obligate themselves to pay on a business credit card or loan. Either way, a chapter 7 can eliminate that debt.
When a business wants to shut-down, it too can file a chapter 7 with the goal of eliminating all of the business debt. Many businesses close down and then file a chapter 7 to eliminate debt. And then the owners are free start another business without the need to address that old debt.
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