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Seasoned Legal Judgment For The South Metro Area

50 Cent Files Bankruptcy

On Behalf of | Jul 14, 2015 | Uncategorized |

In the wake of a $5M verdict in favor of a woman suing Curtis Jackson III (50 Cent) for wrongfully posting a sex tape of her without her permission, and a $17.2M judgment in favor of a headphone manufacturer when Jackson stole its headphone design for a brand he developed using the manufacturer’s designs, Jackson has filed for chapter 11 bankruptcy protection. This post explains what that means and what can you learn from it.

Chapter 11 bankruptcy is traditionally used by large businesses to restructure their financial obligations to creditors. You may recall large chapter 11 cases like GM, Lehman Brothers, WorldCom, Chrysler. But individuals can file chapter 11 cases as well. A good primer on chapter 11 is available from the court itself here. Individuals, like Jackson, may choose to file a chapter 11 case mostly due to limitations or draw backs under other bankruptcy chapters. For example, in a chapter 7 case a debtor’s nonexempt assets are liquidated by the trustee to pay creditors’ claims. In a chapter 11 case the debtor is in possession of their assets and establishes a plan to repay creditors over time while keeping their assets. Chapter 11 can be advantageous to individuals if they have significant assets they wish to keep. Jackson appears to have significant assets related to his music business, as well as various other business enterprises he operates or has sold for substantial gain (like Vitamin Water). An individual may need to file a chapter 11 case if the individual’s debts exceed the debt limits in chapter 13 ($383,175 unsecured debts – like credit cards; $1,149,525 secured debts – like mortgages and car loans). That appears to be the case with Jackson as well.

But we don’t file chapter 11 cases because for most consumers, a chapter 13 case will give you the advantages of a chapter 11 case at a fraction of the cost, time and frustration. Chapter 13 cases have a mere $310 filing fee and attorney’s fees are on the order of $3,500, though those fees can largely be paid within the plan itself. A chapter 11 case has a hefty $1,717 filing fee, and the attorney’s fees are often tens of thousands paid over the term of the plan (or out of bankruptcy estate assets). The chapter 13 case often takes a few months to get a plan in place and confirmed, but then largely coasts after plan confirmation with the debtor making plan payments thereafter. Most chapter 13 cases involve a 60 month plan. In a chapter 11 case, the debtor in possession must make monthly operating reports showing they are appropriately operating their business affairs and paying creditors, and is subject to scrutiny by the U.S. Trustee who oversees the chapter 11 process. A chapter 11 plan may be longer or shorter than 60 months. Often chapter 11 cases drag on – with chapter 13 cases there is a definite light at the end of the tunnel and plan conclusion and case conclusion. The final advantage is that chapter 13 cases are successfully completed about 30% of the time in comparison with chapter 11 cases, which are successful only about 10-15% of the time. Further, chapter 13 cases are often converted to chapter 7 which is not necessarily a bad thing if the debtor’s income was insufficient to cover the plan payments or there was no longer an asset that needed protection in a chapter 13 case.

If you would like to discuss bankruptcy options, even if you aren’t a rap mogul, we offer free office consultations. Give us a call at 952-445-2817. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.