Why Do Wealthy People File for Bankruptcy? (2024)

Plenty of celebrities have spoken in interviews about the moment in which they first realized that they were wealthy, but Pete Townshend of the band The Who had an inkling that the world operates differently for wealthy people when he was still a struggling student. It was 1966, and Townshend had recently met Kit Lambert, a rich kid whose father was a successful orchestra conductor. Lambert’s most recent expensive hobby was bankrolling an unknown band’s rise to stardom, and he had chosen The Who. Townshend accompanied Lambert to a wine store where he was a regular customer. To Townshend’s surprise, he and Lambert walked out of the store with as much wine as they could carry, and no one asked them to pay for it. Five decades later, Townshend had returned to the store many times, and no one had ever asked him for payment. Not only is it easy to run up big bills when you are rich, but it is also relatively easy to make them disappear. Even the wealthiest 1% have the right to file for bankruptcy protection. If you are thinking of contacting an OaklandChapter 13 bankruptcy lawyer, do not let your posh background stop you.

You Can Never Be Too Rich to File for Bankruptcy Protection

According to federal bankruptcy laws, everyone, no matter how rich or how poor, has the right to file for bankruptcy protection when they cannot pay their debts. This right extends to corporations, as well as to individuals; this is why you sometimes see news stories about big businesses that file for bankruptcy and continue operating.

In order for the bankruptcy court to accept your case, you must only submit truthful disclosures about your finances and demonstrate that you are unable to repay some of your debts. Wealthy people often end up in over their heads with debts. When you have a lot of money, it is easy to get overambitious about borrowing, and it is easy for lenders to get overambitious about lending to you.

Yes, you could sell your assets to pay your debts; that would be virtually your only choice if it were not for bankruptcy protection. People file for bankruptcy protection to stop creditors from taking away everything they own. Chapter 7 bankruptcy involves liquidation of assets; most people who file for Chapter 7 bankruptcy do not own any assets except those that bankruptcy law considers exempt from liquidation. The bankruptcy court will not force you to sell the house you live in or the car that you drive to work. When wealthy people file for Chapter 13 bankruptcy, however, the bankruptcy court may ask them to sell their vacation homes, their private jets, and the fancy cars they only drive on special occasions. Therefore, Chapter 13 bankruptcy is a more practical option for people who own many valuable assets. In a Chapter 13 bankruptcy case, the court orders you to pay a certain amount toward your debts each month for several years, and once you do that, the court discharges the remaining balance. Chapter 13 bankruptcy effectively means settling your debts for much less than you would otherwise have paid.

Contact the Law Office of Melanie Tavare About High-Asset Bankruptcy Cases

A bankruptcy lawyer can help you file for bankruptcy protection without losing your Instagrammable mansions, cars, and boats. Contact the Law Office of Melanie Tavare in Oakland, California, or call (510)255-4646 for a free case evaluation.