You can, in most states a mortgage is a non-recourse loan, meaning that the bank cannot come after your other assets if you default.
He owns the company that has loans, but the company has the loans -- not him, he hasn't personally guaranteed them. Company folds, creditors have no recourse (generally).
Home mortgage (for first house) is only somewhat non recourse in 12 states, and even then, some of those do not let you just walk away (like Washington):
>It is difficult to classify states as strictly recourse or non-recourse. Almost all states allow deficiency judgments under certain conditions, for certain types of property or foreclosure proceedings. However, many states restrict not only the conditions under which deficiency judgments are allowed but the maximum recovery for the creditors.
>he hasn't personally guaranteed them.
Source? I imagine the terms of the loans for the Twitter purchase are not publicly available.
1. In a lot of cases you can "just walk away". These are so-called "non-recourse loans". Some states (12) only permit non-recourse loans for residential real-estate.
2. If you own a company and the company goes bankrupt with bonds (loans) outstanding, the recourse is that the bondholders (lenders) get control of the company before the shareholders (you) get anything. (This is analogous to the mortgage situation above: the mortgage lender gets the house, become an REO [real-estate owned] on the bank balance sheet.)
> If you walk away, you lose your investment, but you aren't on the hook for the money that the bank put up.
Well, not always. Banks can add clauses which make you responsible for any losses on the price of the house. In other words, when the price goes below the money owned then that can cause a margin call.
Yes, you literally can. It's sometimes called a "strategic default". More importantly, this was what people did during the subprime mortgage crisis of the mid aughts. In fact, the baller move was to stop making the payments, and then challenge every bank that tried to foreclose because none of them had all the proper paperwork to show they legally owned the debt.[1]
There were even pearl clutching op-eds[0] about how it was "immoral" to stop paying a loan on a property that wasn't worth the loan, even though that is is literally the legal and optimum move that companies do all the time.
Twitter borrowed $13 Billion, not Elon Musk. Technically, "X Holdings" took on the debt (a new company Elon started up), but "X Holdings" is effectively Twitter now.
> I can’t just buy a house with a mortgage and walk away.
If you create a business, lets say "Foobar Incorporated", and get the banks to recognize the debt as assigned to "Foobar Incorporated", you can walk away as "Foobar Incorporated" goes bankrupt.
Similarly, it is "X Holdings" who goes bankrupt in this arrangement, not Elon Musk.
No, he doesn’t. Twitter is formally owned by X Holdings, an LLC Musk set up. In the eyes of the law, Elon Musk and X Holdings are two separate entities, where one can file for bankruptcy and the other may not.
He’ll be liable only if he personally guaranteed the loans, but the details say otherwise.
He owns the company that has loans, but the company has the loans -- not him, he hasn't personally guaranteed them. Company folds, creditors have no recourse (generally).