A Trump Bankruptcy: Further Thoughts

A lot of the debtor-creditor relationship can be characterized by creditors threatening to push debtors out the window and debtors threatening to jump.  Ted Janger reminded me of this defenestration dynamic today regarding the Trump civil fraud judgment.  In my previous post, my assumption had been that the New York Attorney General’s goal was to foreclose on some of Trump’s marquee properties, but Ted suggested that the goal might simply be to trigger cross-default clauses, compounding Trump’s liquidity problems and forcing him into bankruptcy. In other words, bankruptcy might be the goal of the New York Attorney General, rather than a defensive strategy for Trump.  “I’ll jump,” “No, I’ll push.” 

So "which is to be master," as Humpty-Dumpty notes? A lot of this comes down to the political impact of bankruptcy. I’m just not sure which way, if any, it plays. As a student noted to me, Trump could readily message his actions as “They stole the election, and now they’re trying to steal my properties, but I know how to stop ‘em.” 

It was also suggested to me that all the New York Attorney General needs to do is record the judgment lien against Trump’s properties. I’m not sure that’s possible.  Remember, the judgment debtors are Trump personally, his trust, which is basically the top level holdco, and a some other Trump entities, which appear to be intermediate holdcos. If these entities do not hold NY real estate directly, then the AG cannot record the lien against the real estate; the line can be recorded only against real estate directly owned by a judgment debtor. 

Finally, regarding venue, there’s really nothing stopping Trump from creating a new corporate entity and having it file in a one or two-judge district (Wyoming? Alaska?) and bootstrapping in the rest of his entities. That could really slow things down, particularly if it’s a court that doesn’t do remote hearings. 

Another wag even suggested that Trump might want to file in NJ, based on the location of Trump National Golf Club in Bedminster. Who knows? Maybe he’d get his case assigned to Trenton! I don’t know if Trump would even consider doing any of this, but it underscores how easily the venue system can be manipulated.