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Robert Kiyosaki, Financial Guru, Declares Bankruptcy

This article was written by in Debt Reduction. 24 comments.


Robert Kiyosaki has been in the business of selling books and seminars, taking advantage of the Amway pyramid scheme and endorsements from Oprah Winfrey, and built his way to wealth selling his ideas about investing. A few years ago, he teamed up with perennial mogul Donald Trump to sell more books. Kiyosaki and one of his former companies were recently sued by an adult education program producer and promoting for allegedly failing to pay their agreed fee, and Kiyosaki lost the judgment. His company was ordered to pay the Learning Annex and its founder $23,687,957.21.

The company that was sued has already been inactive, and doesn’t have the assets to pay the $23 million. It appears Kiyosaki did a masterful job of protecting his assets; although the guru is presumably wealthy on his own, his other businesses and his personal wealth is protected. He won’t have to pay the $23 million. He has declared bankruptcy on behalf of his company that was sued, and the Learning Annex will be set to receive only a small portion of the judgment, most likely whatever assets are left in Kiyosaki’s old business.

Robert Kiyosaki BankruptcyDeclaring bankruptcy carries a stigma. Some might consider it ironic that a man who talks about financial prowess might end up in a supposedly weak position. For an individual, declaring bankruptcy is an opportunity for new start, but it comes at a price. Bankruptcy stays on your credit report for many years and makes it more difficult to build wealth in the future. And there are certainly people who simply make poor decisions with credit to the point where it becomes overwhelming, and the declare bankruptcy because it’s easier than finding a way to change the situation.

Because Kiyosaki was able to protect his personal assets from the judgment, bankruptcy for his company is the best business move to make. It’s the only choice when faced with a requirement to pay a company far more than what is left in the business. You can be confident, however, that the “few million” left in the company that the Learning Annex will be able to get its hands on represents a small portion of Kiyosaki’s overall wealth.

Michael Kitces, a financial planner, noted on Twitter that Kiyosaki did the right thing by leaving a few million in the company. Had he left nothing, the Learning Annex might have worked harder to get to Kiyosaki’s wealth in his other businesses or his personal wealth.

Will bankruptcy hurt Kiyosaki’s reputation?

Kiyosaki has garnered an army of rabid fans over the years, thanks to his no-nonsense, politically incorrect attitude, easily mistaken for “telling the truth.” Cult of personality is an ugly thing, and blindly worshiping a leader is a sure path to closed-mindedness and reduced access to cognitive ability. It’s clear that he has inspired many people to look at their finances for the first time, and he has introduced his audience to the idea of building wealth towards financial freedom. By being light on specifics, he has managed to shake off a good portion of criticism.

While society often judges the compulsive shopper who uses bankruptcy to clear credit card debt as someone who is skirting responsibilities and using the system to their advantage, society tends to praise businesses who use bankruptcy to restructure their corporate debt or to maneuver their strategy to take full advantage of what the law makes available. It’s a double standard; we want individuals to be responsible for their debt, even when faced with difficult circumstances like unforeseen medical bills or a nasty divorce, but we praise Donald Trump’s business acumen despite his four bankruptcies. The individual who files for bankruptcy lives with the negative consequences for years, but the business owners who file for bankruptcy can continue without much damage to their financial reputation.

The bankruptcy won’t hurt Robert Kiyosaki’s reputation among his fans. If anything will hurt, it’s the possibility that he didn’t pay his promoter as he agreed to do, and it might make it more difficult for him to find promoters who will work with him in the future. He won’t lose any of his rabid fans. That’s the benefit of having a cult-like audience. They ignore anything potentially negative.

From a business perspective, declaring bankruptcy is the right move for Kiyosaki to make. You can’t deny he dodged a bullet by not needing to personally guarantee the $23 million judgment thanks to great work by his accountants, a friendly judge, and the plantiff’s lack of desire to pursue the personal guarantee. I don’t see any reason why Kiyosaki’s other businesses or his reputation will suffer as a result. The better decision would have been not to enter an agreement with the Learning Annex that he couldn’t keep, if that is what happened.

Do you think bankruptcy will hurt or should hurt Kiyosaki’s reputation, particularly because he, unlike other business owners who use bankruptcy to their advantage, preach about responsible financial behavior to some extent?

Photo: Casey Serin
Daily Mail

Updated October 12, 2012 and originally published October 11, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 24 comments… read them below or add one }

avatar wylerassociate ♦162 (Cent)

I’ve never heard of this gentleman before so I’m not gong to comment on his bankruptcy but I will say that there are too many “financial experts” in this country who are fraudulent and not too be trusted. I’m wary of reading and listening to all these experts, the best way to become a financial expert is just to read as much as you can and find podcasts, books, tv shows from trusted people.

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avatar Veronica @ Pelican on Money

Are you kidding me? Being the genius that he is, he’ll turn this situation around in his favor and write a book about it! “How to Save $23 Million, Get out of Bankrupcy and Write a Book About It to Make Another $20 Million.”

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avatar prb

I try to not do business with companies that go in bankruptcy. If you can’t successfully run a business or this is how you treat employees, and customers by pulling this stunt, why should I throw my business you way? I would never do business of any kind with Trump. Trump is trash with glitz and access to television media. I could never trust such a person professionally or personally.

It really is that simple

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avatar mk

good comment finally someone knows about this Idiot Trumps history the only Asset billionaire who has to keep his show and in the media to promote his bullshit..

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avatar Jason @ WorkSaveLive

I’m not a major Kiyosaki fan but I did enjoy the “Rich Dad, Poor Dad” book. I don’t believe it will hinder his reputation too much, because as you mentioned, many of his fans are avid followers. For those that don’t follow him closely, they may recognize his name (if he’s promoting an event) but they may not realize or know that he’s filed bankruptcy.

It’s funny that he teamed up with Trump (who’s notorious for bankrupting businesses) to produce a book; maybe Trump gave him some tips on how to protect his assets and get out without getting taken to the cleaners.

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avatar jim

I assume this will hurt his reputation some but I’m sure he’ll pull through it. Dave Ramsey declared bankruptcy years ago and Donald Trump has done it multiple times. Yet both are still hugely popular. These people are really more TV personalities than legitimate experts anyway.

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avatar Cathy

Dave Ramsey declared bankruptcy BEFORE he started giving financial advice. His advice comes from his experiences in becoming a millionaire (on paper), going broke, then starting over again to build a successful business the right way.

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avatar William @ Drop Dead Money

It makes you wonder how big the deal was that the Learning Annex portion was $20 million+…

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avatar Thomas S. Moore

In my opinion just another reason why the rich get richer, they know the system. He talks about building wealth which he has done. How can this really hurt him, as he built wealth but you can’t make a business stay profitable. In the end he still has money and will probably sell another book about knowing when and what to do to save the wealth you created.

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avatar Jurgen Homola

What amazes me is that most people on here are missing a HUGE point: EVERYONE has the ability to learn the system. Those who do AND APPLY what they learn, have the ability to change their own destiny, and become those people they are secretly jealous of.

The ‘How To’ in this area is not easily accessible, and is certainly not for the ‘not so serious’. There is a HUGE amount of effort and time involved in finding the RIGHT information out there. It is definitely not for the faint-hearted. And that is why there are only about 3% of the world population that are financially independent – with the others either being jealous of those who have spent the time to find out where they wanted to be, or others begrudging those who have worked hard for what they have…

Then, there is another issue: most people – and I bet it applies to most here making derogatory comments about others and their possessions (apologies if you are offended – you probably need to be – truth ALWAYS hurts). Answer 2 questions here, and you will know what you do:
1) Do you have the biggest, best and latest TV?
2) How much time do you spend in any week watching TV, meeting ‘friends’ (who are probably like you) in a bar or somewhere else where you just talk all the trash you have taken in throughout the week.

Did you know that the poorest of the poor have the biggest TV’s? Why? Because they cannot be bothered to give up some of their ‘deserved’ time for ‘relaxing’ rather than to study the systems that could benefit them.

Does it then surprise you why most people on this blog make the comments they do? Do yourself a favor and read all the comments on here and see who you think spends most of their time in front a TV. Then guess how many don’t… about 2% – and we wonder why there is an economical downturn?

Soap opera’s are the most watched programs in the world – made by people who know the system, making money by you – who don’t take the time to learn the system – watching them. What do you learn out of soaps? Not much, besides how to dislike success, despise wealth, ‘cut to size’ those that reach for the stars. Oh – and you learn BIG TIME how to bicker, complain and talk bad about those you don’t really know.

It is a known phenomenon that if you have an attitude of dislike in the financial arena or those who are wealthy – like obviously most here have – you cannot expect to get there yourself – not even if you think the lottery will be your ticket to wealth.

Get yourself role models of some people you fantasize about. If you fantasize about a huge bank account, and success, find those that have those things, and do what they do. It is known as mirroring. Follow their program to the T and you WILL get their results. Go up to the Trumps, Kiyosaki’s and others like them (there is a whole bunch of others) and ASK them how they did it. Read books to find out about these systems. There are TONS available to everyone.

Of course, this takes a commitment and dedication to REALLY get there. You would sometimes need to get rid of some of your so-called friends – and sometimes you may even need to love your family from afar.

Find out what YOU want, rather than making snarly comments on here and think your contribution makes you a rock star – you’re not! Talking about someone you don’t even make an effort to get to know in a derogatory way is a sure recipe for YOUR failure. Rather spend your time with productive stuff.

Here is a recipe for you: Answer the following questions – for yourself…
1) What is it that YOU really want in YOUR life? Look at the following areas to start with: a) your health; b) your family life; c) your financial & wealth creation goals, dreams and desires; d) your emotional life; e) your career; f) friends who have the guts to ADD value to your life and you to them; g) your significant other; h) personal growth (learning about stuff you have no clue about and which is required to reach most of your goals); i) social, fun & recreation; j) your physical environment.

Thomas, this comment is not specifically directed at you, rather at most everyone on this blog, in particular those who just blabber nonsense which they don’t even consider stupid themselves.

Try this experiment for a full 90 days with this… Rather than watching TV, criticizing (or making snarly comments about others), meeting friends in pubs to drink yourself into a stupor, eat your heart out all the time, and just waste your time on ‘nothingness’, answer the questions above for every area of your life. Write these down, and start making plans how YOU CAN ACHIEVE what you really want (because we all can). You will be a different person.

With that I am not suggesting you give up your life of fun. Simply try something else than keep repeating that which doesn’t work and hasn’t worked for you.Try it! You’ll find it works!

And then you know what to do, should bankruptcy ever hit you or your family. YOU’LL know how to get out of it too… without damaging your personal credit score.

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avatar Luke Landes ♦127,505 (Platinum)

I’m not sure I understand the point of this rant, but you’ve already indicated yourself as being ignorant when you claim that “the poorest of the poor have the biggest TVs.” The poorest of the poor are dying of starvation, with no access to clean water, living in third world countries.

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avatar Kathleen @ Frugal Portland

I love the way you turn a phrase: “reduced access to cognitive ability” is just the nicest way to say “sheep-like” i’ve ever seen.

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avatar Taost

Won’t affect his standing much… Devil you know and such…

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avatar Long

I’ve only read Rich Dad and I get the message he is trying to spread, but I’ve never been a fan of his. I think it’s mostly due to the way he pimps out his message. And it’s exactly that…pimping. With that, the strategic move to declare bankruptcy is a good example of how “the system” can be gamed. I doubt his reputation will be hurt. Most people who read the books or go to the seminars won’t even blink an eye.

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avatar Chris

I have followed Mr Kiyosaki on Twitter for a few months now & have enjoyed most of the motivational tweets he’s offered. There are also some points of view that we do not share however. I won’t be following him any longer, not because of the bankruptcy itself but the reason behind the bankruptcy. Integrity or lack thereof!

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avatar Ceecee ♦53 (Newbie)

I have read several of his books. I believed in some of his advice, but not all of it. I admit, I am disappointed in this development and it does tarnish his image and credibility for me. I won’t rush to read any of his new books, and if I read any, I would now take the info with a huge grain of salt. Yes, he will emerge from this fine, as did Trump. But I’ve never felt the same about Trump either.

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avatar Dave

He is not bankrupt, one of his old companies that was out of business for years declared for bankruptcy because they sued that company for more than the person who was suing asked for. The he company is a corporation and he is not liable to pay out of his own pocket because the old company is its own entity. That was one of his first companies that he no longer was running but now Annex sued him for money the company did not have. SO HE IS NOT BANKRUPT PERSONALLY, HIS OLD COMPANY IS BECAUSE OF THE LAWSUIT. when you get rich everyone is after your money and a lawsuit’s are common for big name companies. here are some people you might know that went bankrupt in a business venture when they started off but they learned from their mistakes and there company now flourishes. That’s what Kiyosaki’s message is in his books, entrepreneurs fail lots of times but they learn from those failures and succeed.

-Henry Ford, founder of ford motor company
-Donald Trump
-Walt Disney
-H.J. Heinz- founder of Heinz ketchup brand
-George Foreman-boxer/foreman grill
-Clarence Saunders- founder of Safeway
-Milton Hershey- founder of Hershey chocolate brand
-Larry King
-William C. Durant-founder of general motors-Chevy
-Stan Lee- founder of marvel comics brand
-Abraham Lincoln- president

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avatar futchica

Anyone who read the second paragraph of this post would understand that Mr. Kiyosaki is not declaring personal bankruptcy. But within the online PF crowd, not taking responsibility for ones failures is itself seen as a failure, bankruptcy or not. Investing is inherently risky, so is starting any company or partnership, but when it appears that one partner hasn’t held up his end of the bargain and then walks away from his financial responsibility despite the ability to make his partner whole, it puts the bankrupt in bankruptcy.

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avatar Jurgen Homola

Love your comments, Dave. You obviously have been there, done that and worn the T-shirt. And I am sure you ave learnt something from life too…

Of course there are hundreds more that have been down before making it big, and influencing others in a positive way, like
- Oscar Wilde
- Wayne Newton
- Toni Braxton
- Michael Jackson
- Andy Gibb
- Gary Coleman
- Burt Reynolds
- Kim Basinger
- Mike Tyson
- Stephen Andrew Baldwin
- Jose Conseco
- Cyndi Lauper
- Zsa Zsa Gabor

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avatar Kyle

I think it will probably bolster his reputation. He’ll say “hey, look at how I used my superior financial knowledge to beat the system.” People will eat it up.

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avatar Billy Bob

BK is just a tool for RK. Anyone who thinks this guy has hit bottom is ignorant of how he works.

I took away from my reading of RK good definitions of an asset and a liability. I read his original book in 2004 or so and it informed me as I changed my life in the ensuing years.

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avatar The Librarian

It’s time for a little critical thinking here. The headline is factually incorrect. Robert Kiyosaki did not file for bankruptcy. One of his corporations did. Donald Trump’s casino has filed for bankruptcy at least twice. Trump himself confirmed in a tv interview that his casino represents about 2% of his entire net worth. Smart, wealthy people diversify their assets into different businesses controlled by different corporations. Any lawyer and/or accountant would advise them to do that. They would also advise incorporating in Nevada or Wyoming because these states have great privacy laws and no state income tax. Notice that Kiyosaki’s company filed for bankruptcy in Wyoming.
This won’t have any effect on Kyosaki at all other than the ignorant conclusions that people will come to. On the other hand, if the plaintiff can prove somehow that the defendant company was a sham company undercapitalized intentionally for the sole purpose of cheating potential creditors, that’s a different story. In some cases, a plaintiff can pierce the corporate veil. Maybe Kiyosaki was sued personally along with the corporation. The fact that a judgment was rendered only against his corporation suggests that he and his wife were dismissed as personal defendants during the proceedings, or the judge awarded a judgment only against the corporation. The whole thing sounds like a contractual dispute to me.
If Kiyosaki had used his corporation to run up millions of dollars in unsecured debt in the name of the corporation and the debts were incurred for personal expenses, then there would be a moral issue here. Bankruptcy almost always involves a bit of dishonesty. It involves a person or a business not paying a debt. I don’t see any evidence that Kiyosaki intentionally ran up a huge debt through a corporation with the idea of filing for bankruptcy. I would have a problem with someone’s ethics in that kind of case. Kiyosaki could have appealed the judgment. He made a business decision and decided to walk away. It happens all the time.
Kiyosaki did not file for personal bankruptcy. One of his companies filed for corporate bankruptcy. It happens all the time. He lost a business dispute. Big deal.

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avatar pops

A very shrewd business strategy but nevertheless, legal. This is what he taught in his books about using corporation to protect the wealth you have earned.

Whether his reputation is tarnished or not, the principles on his books (most of it) are still fundamental. If you can’t trust him, you can at least trust the principles.

Like a gradeschool math teacher who taught you 1+1 = 2. If he/she did a slight mistake on any addition problems, will it mean 1+1 = 2 ain’t true anymore?

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avatar James Green

Robert Kiyosaki did EXACTLY what he teaches in his books about protecting your assets with LLC’s from the law suit blood sucking leaches. Kudo’s Robert, need to go back and re-read his books.

(Only the first 3 are worth anything. Ones after that are rehashes of the same subject matter.)

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