This is actually just not true at all.
When you get your advance it is almost always a non-recoupable advance. Meaning that the label can't ask for it back, but they can charge your royalties against it. So say they give you $100,000. You can spend $50,000 of it on your album, and pocket the other $50,000 but even then you're still not going to be making your royalty until the label have made the $100,000 back again. Maybe some super corrupt amateurish indie labels who prey on the mentally retarded don't do this but all of the major labels do. It's an old system that dates back a long time.
The only way a label can recoup your advance back is via royalties.
What they can do is cross-collatoralize if you don't make it all back. So say you only pulled $50,000 in sales off that $100,000 advance. What the label will do will give you another $100,000 for your second album on advance, and then make the full recoupable amount $150,000 - adding on the deficit from the last album. They can do this into infinity with artists that don't make money by claiming that by not making the advance back, they ran at a loss.
This isn't true of course because in a company like that, "losses" like that are ghost numbers. They are pulling money off even poor selling records in so many ways that you can't, that even asking for an advance back is sort of a rip-off on the traditional royalty rate most people get.