January 27

Bankruptcies of the Rich and Famous

A common misconception is that you have to be insolvent, or have more in debts than assets, to file for bankruptcy.  United States bankruptcy laws do not require insolvency.  In fact, we regularly see from the news that even the ultra rich, like billionaire, Donald Trump, use bankruptcy protection as a financial tool even though they are not insolvent.  Donald Trump did not personally file for bankruptcy protection, but four companies that he owned did.  When asked about these bankruptcies during the first Republican presidential debate held on August 6, 2015 Mr. Trump explained, “I have used the laws of this country . . . the [bankruptcy] laws, to do a great job for my company, for myself, for my employees, for my family.”  Trump’s actions and his words seem to indicate that he does not see bankruptcy as an option of last resort, but instead as a legal tool to protect himself, his businesses and his family from problematic debt.

Another recent example of a wealthy individual filing for bankruptcy protection is rap star Curtis James Jackson III whose stage name is “50 Cent.”  Mr. Jackson’s assets reportedly total $24,823,899.18 and his debts $32,509,549.91.  Although Mr. Jackson is technically insolvent, he reportedly brings in over $185,000.00 per month from marketing and promotional deals.  $185,000.00 per month over 12 months comes to $2,220,000.00 per year.  Not bad work, if you can get it.

Other bankruptcies of the rich and famous include, actor, Burt Reynolds; actor, Stephen Baldwin; actor, Corey Haim; actor, Gary Coleman; comedian and actor, Redd Foxx; actor, Mickey Rooney; actress, Kim Basinger; singer and actress, Toni Braxton; singer, Latoya Jackson; singer, Dionne Warwick; singer, Merle Haggard, singer, Luther Campbell of 2 Live Crew; singer, MC Hammer; singer, Tom Petty; musician, Jerry Lee Lewis; historical figure and inventor of the Hershey bar, Milton Hershey; historical figure and author, Mark Twain; historical figure and creator of Micky Mouse, Walt Disney; boxer, Mike Tyson; figure skater, Dorothy Hamil; Major League baseball player, Lenny Dykstra;  reality star, Teresa Giudice; reporter, Larry King; and model, Anna Nicole Smith.  The list goes on and on.

You may be wondering who might find out if you file for bankruptcy protection.  Unless you are running for President, like Donald Trump, or are a famous rapper like 50 Cent, the news likely will not pick it up.  To learn if anyone can find out if you file for bankruptcy click here.

Available bankruptcy options are different depending on debt, income and other considerations

As income and debt go up, bankruptcy options go down.   Given the amount of debt he has, Curtis Jackson would not be able to file a Chapter 13 reorganization bankruptcy.  Chapter 13 bankruptcies are not available if unsecured debts are more than $360,475.00 or if secured debts exceed $1,081,400.00.  According to the media Mr. Jackson instead filed for Chapter 11 protection.  A Chapter 11 is a reorganization bankruptcy which is available to businesses and individuals.  Chapter 7 bankruptcies for consumer debts have limitations based on the median income of the state that the individual seeking bankruptcy lives in.  This income limitation is referred to as the “means test.”

Bankruptcy is a legal financial tool that is used at all income levels in this country.  As Donald Trump put it, he “used the laws of this country . . . the [bankruptcy] laws, to do a great job for my company, for myself, for my employees, for my family.”  If you are feeling the burden of mounting debt and need a legal tool that will help you strip away and rearrange debts to help yourself or your family, please feel free to call me to set up an initial free and confidential consultation.  Call 601-853-9966.

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