Finance

Rudy Giuliani's Disastrous Bankruptcy Case Reveals Bankruptcy System's Loopholes For Influential Debtors

Nothing about Giuliani's past made him appear to be anything close to a good-faith bankruptcy filer.

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GiulianiI appeared in bankruptcy court exactly one time. Many years ago, the firm I worked for extended credit enough to get through trial, to the tune of about $40,000 worth of legal fees, to a client who then promptly filed for bankruptcy.

Knowing that unsecured legal debts were exactly the kind of thing bankruptcy was meant to discharge and not having been an equity partner who stood to lose anything from such a dumb business decision, my reaction was a shrug. It should have been a sigh, though, because I was ordered to put my admission into federal court to use in a doomed attempt to contest the discharge of this debt, which I would have preferred to have had laughed out of court as opposed to berated out of court like it was as though this had all been my idea.

For the majority of bankruptcy filers, minus an exasperated associate attorney sent to tilt at windmills by his unknowledgeable superiors, that is more or less how the bankruptcy system works. It is neat, it is efficient, and in a matter of only a few months, 99% of individual Chapter 7 filers receive a discharge of their debts (a good many of them do not even have to surrender any personal property for liquidation thanks to a number of fairly generous exemptions).

However, as several different types of bankruptcy exist, things get complicated pretty quickly whenever corporate entities are involved. Occasionally you even get that formerly well-heeled debtor who is trying to keep more than he’s entitled to, thereby stiff his deserving creditors, as though the rules do not apply to people like him.

Well, you already read the headline: Rudy Giuliani’s bankruptcy case is a mess. On June 17, Giuliani’s creditors, as well as the judge overseeing his case, sounded off in a hearing about his months of missed deadlines, his opaque financial disclosures, and, in many instances, his failure to respond to communications at all.

In this hearing, Giuliani’s creditors asked the judge to appoint an independent bankruptcy trustee. The trustee, if appointed, would take over Giuliani’s personal finances and manage his business dealings to prevent him from hiding or wasting (more) money.

When Giuliani filed for bankruptcy in December 2023, he owed approximately $153 million to about 20 individuals and entities, including $148 million owed to the two Georgia election workers he defamed in the course of spreading Donald Trump’s election lies. Generally, filing a bankruptcy case automatically stays (pauses) collection efforts by most creditors, so Giuliani got a big reprieve on the huge sums already owed. Giuliani has also already seen the benefit of chilling other pending litigation against him (such as Hunter Biden’s attempt to sue him over releasing material from the former’s laptop).

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The motion to appoint an independent trustee, if granted, would wrest control over his finances from Giuliani himself. What is difficult to understand is why Giuliani was given months to pilot his own bankruptcy case in the first place.

Giuliani has a long history as a lying grifter who does not pay his bills. He is in the process of being disbarred in multiple jurisdictions. He’s also been criminally charged for his attempts to interfere with the 2020 election. Nothing about Giuliani’s past made him appear to be anything close to a good-faith bankruptcy filer at the outset. During his bankruptcy case, Giuliani has continued to make a mockery of the system that is supposed to provide necessary protections for small-time debtors.

After agreeing in bankruptcy court to limit himself to spending the already ludicrous sum of $43,000 per month, Giuliani admitted to spending nearly three times that amount in January, the first full month of his bankruptcy case (his financial disclosures since then have not been clear enough to give anyone a realistic idea of how much he’s been spending). A source close to the case informs me that Giuliani is in a romantic relationship with married fellow insurrection booster “Dr.” Maria Ryan (her degree is from an unaccredited diploma mill) who he is openly paying handsomely as his purported employee (along with her daughter) instead of paying anything to the people to whom he already owes millions of dollars. Giuliani has denied the sexual nature of his relationship with Ryan, but keep in mind that he is Rudy Giuliani, so of course he’s gotten caught on tape very much seeming to admit to it.

I could go on and on, but isn’t that enough? Giuliani is abusing the bankruptcy process like any number of rich entitled douchebags before him.

Could there really not be some mechanism whereby bankruptcy courts didn’t have to start out assuming each and every filer is going to act in good faith? The sad reality is that in the many months between Giuliani’s bankruptcy filing and whenever the court gets around to doing anything about his machinations, hundreds of thousands of dollars — perhaps millions — will be gone. People whose lives Giuliani ruined, who he owes a tremendous amount of money to, might never see a dime.

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Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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