Using bankruptcy strategically to aquire more real estate

Investor · Albany, GA · Member since 2015 · 39 posts · 8 votes

I keep hearing about how the rich file bankruptcy not because they are in trouble but as a

strategic way to build more wealth. For example Donald Trump, Rich Dad's Robert Kiyosaki, 50 cent, Henry Ford even Walt Disney..all filed bankruptcy. So how could we as investors use bankruptcy as a tool to build wealth? I know I would need to first protect my assets that I already have but how?

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Jerry Limber

Investor · Sterling, VA · Member since 2014 · 26 posts · 32 votes

10y

Not to stand on my soap box, but even if a legal strategy exists, it still feels "wrong" to me. In this industry (and in this world), our word is our bond. Borrowing money without the intention of ever paying it back feels disingenuous at best, and dishonest at worst. I think there is a time and a place for bankruptcy, but it's a tool of last resort, not an investment strategy. This isn't about legality, it's about what kind people we choose to be. It's strategies like these that give investors a bad name. Jerry

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Matthew A.
New Haven, CT · Member since 2016 · 90 posts · 99 votes
10y
Changing your profile picture, abbreviating your last name and hiding your profile now doesn't change anything. I already know everything about you via the internet and have your information stored in case anyone wants to know about your bank fraud.
Good luck
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
10y
@Marquis W.
When you file bankruptcy, you are stealing from people you owe money to. If you rack up credit card debt due to reckless spending, then you lack self control and financial intelligence. If you rack up a credit card debt intentionally with no intent to pay it back, that is fraud. Fraud is when you intentionally deceive for financial gain. Businesses that file bankruptcy do so to restructure debt, so they can keep operating and ultimately pay back some or all the money they owe. Your proposing something totally different. You are intentionally taking on debt with no intent to even try to pay it back. That is fraud.
Rationalizing illegal activity by saying you were not born to privilege is like a shoplifter saying they stole to put food on the table.
Most successful people were not born to privilege and became successful through hard work and by making smart decisions. Why are you unable to do it that way?
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Phil G.
Real Estate Broker · MA · Member since 2013 · 361 posts · 297 votes
10y
I think the content of this thread along with identifying information should be sent to this idiot's superiors. They are more likely to know if he actually tries this.
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
10y
Originally posted by @Marquis W.:

Bank Fraud?? No thats what the guys at Goldman and Sachs did my friend. I can advocate what ever I want to and Yes I work at the fire department in Albany Georgia where I see poverty, a struggling school system, and I also see homes being rented out that are not even fit for a dog to live in by owners who are millionaires and who I think are the real scumbags. But I am being called a scumbag because I see a "LEGAL"!!! loop hole in the system. Excuse me for be honest with my thoughts next time I will keep it to myself... because I see the world is full of closed minded people who care more about a system that cares nothing for them then the people who really depend on you. Any means necessity! If I want it I will have it point blank, you don't have to like my way for going about getting it you don't have to like me or respect me. I will sleep just fine trust me. In the words of Frank Sinatra " I did it my way"
No what you propose is illegal. Ask a lawyer. One thing we agree on is that if you do plan to commit a crime, it would be smarter to keep it to yourself next time.
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Account Closed
Investor · Bushnell, FL · Member since 2016 · 456 posts · 224 votes
10y
what everyone that endorses this borderline criminal behavior has failed to mention, is that who do you think pays in the end for all the unpaid balances ? Everyone else, that's who ! If you charge something or use credit for some purchase with the intentions of never paying it back, that is criminal, period! It doesn't matter if your caught or not. It is wrong morally and criminally. Just because abortion is avalible, it shouldn't be used as a form of birth control. Remind me to never loan you guys money. Lol. Please be true to yourselves and others.
Praying for each of you,
God Speed
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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
10y
BTW, intent to use bankruptcy prior to business transactions or conspiring to use bankruptcy as a plan to avoid debts that are to be created is a felony in itself!
So, hush, hush, before they start calling your name, hush, hush! :)
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Marquis W.
OP
Investor · Albany, GA · Member since 2015 · 39 posts · 8 votes
10y
it is true that when you assume you make an *** of yourself. The Majority of you assumed that I am planning on filing bankruptcy all because I asked a question. I said that this was hypothetical and if one was to file bankruptcy to build wealth how would one go about it. But being the asses that you all are you jumped on me assaulting my character when I do more good in my community in a day then most of you have done in a life time. And as far as contacting my superior go ahead his name is Jehovah.
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Marquis W.
OP
Investor · Albany, GA · Member since 2015 · 39 posts · 8 votes
10y
this is truly some Salem witch-hunt type stuff all of sudden I'm the bad guy because I asked an question this is not something I have done but I have been called stupid, scumbag, who knows what else... for asking a damn question. If a question can't be asked in this discussion forum without being battered then how can we have a honest open discussion.
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
10y
The below link may be helpful to explain corporate bankruptcy to anyone who doesn't fully understand how it works. It is not a proactive business strategy, it is used by companies after they have found themselves in deep trouble. In other words, it is a last resort to save the company, not an "innovative strategy". The misconception about bankruptcy is fueled by the media who is not financially educated. In this election cycle, bankruptcy has become a political attack tool. Sadly this is just politicians feeding off the financially uneducated.
What people fail to understand is during chapter 11 bankruptcy, most common for businesses, creditors often take some ownership in the company. Debts are often paid, but with new terms. The goal is to avoid liquidating the company, which is less desirable because the creditors get even less. Bankruptcy is meant to help creditors by making the best out of a bad situation.
http://www.investopedia.com/articles/01/120501.asp
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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
10y
Just keep doing what you are doing. You have six houses already and creditors that are supporting your wealth accumulation. Keep up the hard work and become one of those millionaires that you hate. Best way to stick it to the man is to succeed and the most rewarding success often comes from overcoming tough situations.
You are asking us to foot the bill for your debt...that's what gets members here worked up. With six houses, a good job, and a job that supports the community, you've already proven that you are intelligent and hard working enough to do it on your own.
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Russ Fallon
Louisville, KY · Member since 2016 · 4 posts · 2 votes
10y
@Marquis W. I am a newbie and I am trying to get started in real estate investing. I work a regular job an have a wife and kids and am trying to get into this game to build wealth for my family. PLEASE do not do anything like you have described above as part of a strategy. It is incredibly dishonest. And it gives the rest of us a bad name, which makes it that much harder for people like me to get started.
Cheers
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Michael Lewis
Investor · Independence, MO · Member since 2016 · 89 posts · 70 votes
10y
Um in your 2nd post you confirm that's what you are trying to do. Now your a scumbag and a liar. You also repeatedly said how you were gonna do what you had to do to get yours. Now you are back pedaling and trying to act like that wasn't your intention.
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Ross Leavitt
Real Estate Investor · Springfield, OR · Member since 2013 · 94 posts · 35 votes
10y
You think you are entitled for the banks to loan money to you. It's their money, and every member here has to work hard to persuade them to loan it to us. If you own rentals, you will sooner or later deal with an applicant that is mad that you rented your house to someone else, because he thinks he is entitled to your asset.
Taking out debt and becoming unable to pay it is one thing, and the bankruptcy laws are generous to people in this situation. Taking out debt with no intention of paying it is theft. That would be a tactic that no one here on BP supports.
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Roy Oliphant
Rockwall, TX · Member since 2014 · 380 posts · 211 votes
10y
@Marquis W.
As has been said, there is a significant difference between winding up somewhere and planning to go there. With BK, if trouble drives you there, it may be a way out. If you arrange things so that you purposely go there with assets you are hiding or mis-identifying the owner (else, how would this be wealth building) you are likely committing several felonies; bank fraud, wire fraud, mail fraud, BK fraud, etc. Still all of that might save you some on housing costs as the government will likely provide you a small place to stay for several years.
4 Reply
Susan Maneck
Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
10y
Originally posted by @Jerry Limber:

Not to stand on my soap box, but even if a legal strategy exists, it still feels "wrong" to me. In this industry (and in this world), our word is our bond. Borrowing money without the intention of ever paying it back feels disingenuous at best, and dishonest at worst.
I think there is a time and a place for bankruptcy, but it's a tool of last resort, not an investment strategy. This isn't about legality, it's about what kind people we choose to be. It's strategies like these that give investors a bad name.
Jerry
One of the reasons I would never vote for Trump is because of his cavalier attitude towards bankruptcy. When he talks about "renegotiating" the US debt, for instance, he is really talking about defaulting, something unconstitutional.
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
10y
Originally posted by @Susan Maneck:

Originally posted by @Jerry Limber:
Not to stand on my soap box, but even if a legal strategy exists, it still feels "wrong" to me. In this industry (and in this world), our word is our bond. Borrowing money without the intention of ever paying it back feels disingenuous at best, and dishonest at worst.
I think there is a time and a place for bankruptcy, but it's a tool of last resort, not an investment strategy. This isn't about legality, it's about what kind people we choose to be. It's strategies like these that give investors a bad name.
Jerry
One of the reasons I would never vote for Trump is because of his cavalier attitude towards bankruptcy. When he talks about "renegotiating" the US debt, for instance, he is really talking about defaulting, something unconstitutional.
Read the link I provided in an earlier post that explains business bankruptcy and specifically chapter 11. It is a process of renegotiating debt and reorganizing the business. The purpose is to keep the business from folding and to help creditors get their money. Trump lost considerable money and ownership position as a result of each bankruptcy. The creditors (people he owes money) took the ownership. Chapter 11 is about paying back debt, it is totally different than Chapter 7 where you liquidate and default. When a business is in deep financial trouble, creditors would welcome chapter 11.
In 2009 Chrysler filed Chapter 11 bankruptcy. The US government pledged $8B in loans and took 8% ownership. The auto workers union got 55% ownership. Creditor liabilities were renegotiated. This plan was put in place by President Obama and his team. Prior to that President Bush had given several billion in loans and I am sure he would have done similar to Obama to save the business.
I am not entering into a political debate. I am just showing you that bankruptcy is not a matter of politics. It is a method to rescue a business from failing. Often it is the best decision for the creditors and employees. The owners always lose money or ownership. There is nothing unconstitutional about bankruptcy.
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Susan Maneck
Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
10y
Oh, I agree. What I'm talking about is Trump's plan to renegotiate our National Debt. I have no problem with allowing companies to declare bankruptcy per se, only with Trump's cavalier attitude towards it. And renegotiating our national debt would be defaulting and that is a violation of the 14th Amendment which guarantees the faith and credit of the United States.
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William Cavalier
Real Estate Investor · Plano, TX · Member since 2014 · 21 posts · 4 votes
10y
Bottom line: Debt incurred in anticipation of a bankruptcy filing is not dischargeable.
So, AFTER the bankruptcy, those debts remain. It is only right.
William Cavalier, Attorney at Law
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
10y
Under current bankruptcy law I see no way to use bankruptcy to retain possession of real property while discharging debts, unless one is willing to lie under oath. However, for some reason the authorities regard lying in BK to be more serious than just regular lying under oath, I know personally two people who received prison sentences for lying in their bsnkruptcies.
Under the reorganization plan it is possible that one can keep real estate and discharge some debt ultimately; the amount of debt in excess of the value of the property would become unsecured and then potentially eliminated when the bk is converted to a liquidation. However this seems like a lot of expense and work just to own a property with no equity.
In BK the creditors will be represented and their interests heard by the BK trustee and judge. While its possible a judge could favor a consumer in bk, it is more unlikely that the judge would take such a position with a real estate investor.
My conclusion is that people who think they can somehow utilize BK to increase their net worth in some predetermined way are not familiar with the CURRENT bankruptcy laws or have watched too many television commercials by bankruptcy attorneys.
An important point to remember is that no matter what exempt assets you enter BK with, a secured lien on real estate stays with that property; you can not have the secured lien discharged and maintain ownership of the property free and clear. This simple fact alone will eliminate 99.9% of the "fantasies" of those with expandable morality.
Private Mortgage Financing Partners, LLC
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