So I have no idea how bankruptcy works, is it a get out of jail free card for debts? Like a judge basically says "okay we're gonna wipe your debts and you're gonna have a terrible score for a few years" then you get a credit debuff that gets longer every time you file for one?
A Chapter 7 bankruptcy appears on your credit report for ten years, and the impact it has on your score decreases as more time passes since the discharge. This is why Phil (we believe) was able to get credit cards now after a few years of complaining he couldn't get credit cards anymore. Once those ten years have passed there is no record it ever happened on your credit report and a new one won't result in a larger or longer-lasting hit to your credit score. Even the bankruptcy courts don't make you self-report bankruptcies from > eight years ago.
Chapter 13 (see below) follows the same principles but it falls off after seven rather than ten years because it is tougher on the debtor and more favorable to creditors.
Depends on the type of bankruptcy, Phil got a chapter 7. There are certain types of debt that can be discharged in a chapter 7, you can only discharge unsecured debt. Namely, piggy discharged all of his credit card debt. The credit card companies can of course send their lawyers to contest it but none of them did, either because they figured they can eat the loss or because he's been paying off minimums for so long that even if the debt was discharged they still turned a profit on him in the end, either way they didn't think it was worth it. So it all went through without a hitch. He will have to wait 8 years since he filed to get another chapter 7.
The other debts he had at the time of filing were the mortgages on his two khandos, but the CTKhando got foreclosed on so he doesn't have to worry about it anymore, and his car loan which he paid off this year.
This is mostly accurate except for the bit about the Connectikhando - in Chapter 7 you can either reaffirm a secured debt (i.e. hold onto the property and commit to keep paying the loan/mortgage) or discharge it (surrender the property). Phil reaffirmed the mortgage on the Snort Fort but discharged the Connectikhando mortgage, and due to how Chapter 7 works MidFirst was unable to pursue him for the deficiency on the mortgage.
One thing I would add is that in Chapter 7 the trustee seizes everything that falls above a certain cutoff (technically a set of cutoffs since there are separate allowances for clothing, electronics, etc.). According to Phil, the trustee forced him to sell the Wall of DVDs (for newcomers he had a DVD/BluRay collection that was maybe 7 or 8 feet wide by 3 or 4 feet tall) because they were above any cutoff he could claim them under. Considering how much he lied on the application I doubt he sold those but he was correct when he said that the trustee can order the sale of anything that is not covered.
The other important thing is that if your home falls above the cutoff for the value of your residence, the trustee will seize it and write you a check for the equity you had in the property. There is no way to get a waiver here due to extraordinary circumstances. Since Phil's equity was barely under the cutoff in 2020 even after lowballing the value + subtracting a realtor's fee to deflate it further, there is a very real chance he could lose the condo in a second Chapter 7.
The other form of bankruptcy Phil might consider down the road is Chapter 13: In chapter 13 the trustee does not have the ability to seize and sell property. Instead, the debtor is held to a payment plan where all his/her disposable income goes to the bankruptcy court which distributes it to unsecured creditors and the trustee's role is to review and approve or disapprove the plan. Once the payment plan concludes in either 3 years (for debtors with income under the state median) or 5 years (for debtors with income over the state median) the unsecured creditors' claims are considered to be paid in full.
There are two DSP-specific things to consider with Chapter 13: First, the payment plan will be developed based on his income at the time he files for Chapter 13. If his income drops unexpectedly the only safeguard is that he can have his ongoing Chapter 13 bankruptcy dismissed and refile with his new, lower income...... which would cost thousands in legal fees with no guarantee the trustee will approve it. Second, business expenses count against disposable income. Remember those $5,000 / month business expenses Phil used to qualify for Chapter 7? He could pull that stunt again, claim most of the WWE Champions spending as "business related" and leave
just enough disposable income for the trustee to sign off on his plan. He'd have to thread the needle carefully here to avoid both a dismissal and losing too much of his Champions money.
Edit to add:
About two-thirds of debtors who get their Chapter 13 payment plan approved still fail to make the required payments which gets their cases dismissed. Considering how bad Phil is with money I would be shocked if he made all his payments in a Chapter 13 case.
