Bankruptcy can be a vital estate planning tool for some. My colleague Suzann Becket is afellow member of Wealth Counsel. She recently posted the below suggestion that bankruptcy is one tool that fits into your estate management tool set.
What do Abraham Lincoln, MC Hammer, Johnny Unitas, and Walt Disney have in common? They all filed bankruptcy at some point in their lives. These men were all at the top of their field at some point in their professional lives. In some cases, such as Lincoln and Disney, the bankruptcy came relatively early. By taking stock of their situation, and availing themselves of the legal remedy to shouldering a debt they felt they could never recover from, Mr. Lincoln and Mr. Disney were able to start fresh. They both went on to great things afterward.
Johnny Unitas was a superstar quarterback for the Baltimore Colts, while MC Hammer was an entertainer with a highly lucrative career. But having a substantial income does not guarantee that business mistakes, lawsuits, or bad investments won’t take their toll. In the case of Unitas and Hammer, their peak earning years were behind them when their financial troubles became insurmountable. Each of them sought bankruptcy protection and both of them were able to recover from their fiscal woes…..
It is likely that much of the public is not aware that bankruptcy can take multiple forms, depending on whether it is filed under Chapter 7, Chapter 11, Chapter 12, or Chapter 13. You may be able to determine which option is best suited to your circumstances by doing a little independent research. But you should never fear the process based on the feeling that you are on your own with no where to turn for help. That is just not the case.
There is also at least a slim possibility that part of the reason some people are resistant to the idea of filing for bankruptcy protection is the fear of embarrassment. The idea of being perceived as a deadbeat who is trying to run out on their obligations may cause some people who would benefit from the law, to continue to struggle and suffer the stress of serious monetary shortfalls month after month. Perhaps it would be worth reminding those people that the intent of the law is to provide options and solutions, not to ridicule an individual who has fallen on hard times, in many cases through no fault of their own.
Henry Ford, Mickey Rooney, Kim Basinger, Debbie Reynolds, and Donald Trump have all filed for bankruptcy protection. Yet their fame and their accomplishments are not diminished by the fact that their finances have left them suffering through sleepless nights, and mounting stress levels at one time or another.
Seeking bankruptcy protection is certainly nothing to be taken lightly. But it can be argued that it shouldn’t be avoided unnecessarily, either. Perhaps it is of comfort to some when they realize that they may feel admiration for others who have found themselves in difficult times and sought the legal protection afforded by bankruptcy law. Maybe it is worthwhile to know that we are truly not alone during some of the more stressful and worrisome periods of our lives.
You may not consider bankruptcy as a first option tool in estate planning, but you should always keep it in mind as a potential tool. Times have changed, and bankruptcy is no longer a sign of failure. Rather it has become a business tool as well as a personal tool in managing your estate. If you wish to explore the benefits of bankruptcy, be aware that knowing how and when to use this tool can be critical to preserving your estate from expensive court battles. If this is a topic we should discuss, call me or leave a comment here.