Linda McMahon Knows How To Take A Hit And Come Back Stronger

“..It’s really not how you fall… it’s how you get back up…” These are wise words from Linda McMahon, the head of the federal Small Business Administration and the co-founder and former chief executive officer of WWE. Because of her background, you might think this is advice she is giving to an aspiring wrestler, but it is actually a summation of the lessons she learned when she and her husband Vince were forced to file for personal bankruptcy.

Why Were the McMahon’s Forced to File for Personal Bankruptcy?

According to Linda, the McMahons accumulated over $1 million in debt when she was in her late 20s. She and Vince, “partnered with some folks who weren’t quite the business partners we expected them to be” and invested in a construction company and a cement block factory. Things quickly went south, and the McMahons lost their house and had to watch as their car was repossessed.

“We didn’t really know the safeguards to really look for. We were relying on someone else whose opinion we respected at the time for those kinds of investments, and they just didn’t work,” says McMahon.

After going through bankruptcy, the couple was determined not to make the same mistakes again. They focused on what they knew rather than trusting others for business advice, and ended up growing the WWE from a 13-person regional operation to a publicly traded global enterprise with more than 800 employees in offices worldwide.

Filing for bankruptcy is what allowed the McMahons to get back on their feet and build their business into what it is today. And the law offers this same opportunity to everyone. Our firm has helped countless Wisconsin families and businesses navigate the bankruptcy system and get on with their lives.

And we do so in a very focused and unique way. Instead of rushing through as many cases as possible so we can make a quick buck and move on, we get to know our clients and work with them to craft a plan that will allow them to move forward on their own terms. We believe this is important because like Linda McMahon says, it’s how you get back up that matters. We don’t just help our clients get through the bankruptcy process, we help them get back up.

Pressing Pause

Ever since Remington filed for bankruptcy and the media reported that that might prevent the Sandy Hook parents from recovering anything if they prevail in their lawsuit against the gun manufacturer, we have been getting a lot of questions from potential clients about the interplay between bankruptcy and other lawsuits. In this post, we’ll dive into this issue and try to answer a few common questions about this topic.

A whatchamacallit.

First, let’s talk terminology. An “automatic stay” is the legal name for what happens to other lawsuits when a bankruptcy suit is filed. You can even think of it like the common command given to dogs — stay. But even good dogs will not “stay” forever. Eventually they get moving again, and so do stayed lawsuits.

Will a pending lawsuit go away if I file for bankruptcy?

The short answer is no. Filing for bankruptcy will not make other lawsuits magically disappear. All bankruptcy does is stay other lawsuits until the bankruptcy case is resolved or the court grants the litigants permission to proceed with other claims.

The longer answer is that some litigants will drop their cases or offer more favorable settlement terms if the party they are suing files for bankruptcy. Because of this, some individuals and companies will file for bankruptcy as a strategic move.

Some examples may help.

One of the most common examples of a legal action that is stayed by a bankruptcy filing is a foreclosure. Filing for bankruptcy hits the pause button on the foreclosure since the mortgage is pulled into the bankruptcy. The mortgage doesn’t disappear, but the lender might be open to renegotiating the terms.

Keep in mind that the stay stops all sorts of cases. A couple that is divorcing will have their case stayed if one of the partners files for bankruptcy.

What about criminal cases?

Unlike civil cases, criminal cases are generally not stayed when the person who is the target of a prosecution files for bankruptcy.

However, there are exceptions to this. If a criminal case involves money or property, it too might be paused until a bankruptcy case is resolved. But this is not a hard and fast rule. If the case is about money or property, but the government is seeking to punish the lawbreaker rather than seeking repayment, the case may proceed.

Consider the case of a person who starts blowing through the toll plaza without paying. The government tracks the person down and files a criminal complaint against them. Well, it turns out the person wasn’t paying the tolls because they couldn’t afford to, so he or she files for bankruptcy. Whether the criminal case is stayed depends on what the government wants out of the case. If the government wants all the back tolls paid, the case will be stayed and might even be folded into the bankruptcy case. If, however, the government wants to punish the toll-shirker by throwing them  in jail, the criminal case may proceed alongside the bankruptcy case.

Bankruptcy is a tool, not a weapon.

Debtors who are considering filing bankruptcy just to pause other cases should proceed with caution. Bankruptcy is meant to be used as a tool, not a weapon. If you are struggling with debt, a debt negotiation attorney can help you organize your financials. If Bankruptcy is your only option, consult with a bankruptcy attorney to discuss whether chapter 7 or chapter 13 bankruptcy is the best option for you.