4 ms·
You have multiple businesses, and sell assets between them... then bankrupt the lame ones. Example: Business 1 buys a $1M piece of equipment with 30% down and
by asdf21 7y ago
You have multiple businesses, and sell assets between them... then bankrupt the lame ones.
Example: Business 1 buys a $1M piece of equipment with 30% down and 70% credit. After a couple years, and knowing that Business 1 is not that profitable anyway, the machine is sold to Business 2 for $150k, even though it's probably worth $700k still.
Business 2 makes $550k profit on the books. Business 1 files bankruptcy. The creditor loses their $250k outstanding loan. If the same owners own both businesses, they come out massively ahead.
Rinse / repeat with dozens (or hundreds) of businesses, some automated workflows and depreciation tables, credit line hacking, etc.
- learc83 7y agoCan't the bankruptcy trustees come after the owner when they see that the machine was sold far below value? They do something similar in personal bankruptcy.
- yellowapple 7y agoSelling things below value is pretty typical in a liquidation/bankruptcy scenario, though.
- learc83 7y agoYeah but there are limits. If I'm about to go bankrupt and I sell my $700k house to my brother for $150k, the trustee isn't going to let me get away with that.
- Phlarp 7y agoThose limits are dynamic based on connections / how many white shoe lawyers you are willing to fund. An established real estate family will have plenty of room to shuffle assets and credit lines around in a favorable way within those limits... for a generation or two.