50 Cent Files for Bankruptcy
The rapper, whose real name is Curtis Jackson III, 40, filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court on July 13, 2015. In the Chapter 11 bankruptcy process, a debtor is able to restructure finances through a plan of reorganization once it is approved by the bankruptcy court. While Chapter 11 is typically filed by businesses and corporations, Chapter 11 can also be used by individuals. If you are the owner of a sole proprietorship, you are the debtor. You also do not have a separate identity from your business. In 50 Cent’s case, he is his own business. Additionally, individuals will choose Chapter 11 if they can’t are unable to file Chapter 13 because their debts are too high, or their finances are complex. This is most likely the case for 50 Cent.
A Chapter 11 restructuring plan can help a debtor balance his or her income and expenses while also regaining profitability and continuing operations. During Chapter 11, a debtor is also able to sell some or all of his or her assets to pay down debt.
Typically debtors file Chapter 11 when assets are worth more than a certain amount. In 50 Cent’s case, he would not have been eligible for Chapter 7 or 13 because his debt is more than $390,000 in unsecured debt.
50 Cent’s Debts
50 Cent rose to fame with his songs, “In Da Club,” and “Candy Shop,” and became a large investor in Vitamin Water. In his bankruptcy filing, the rapper, who is known for his album “Get Rich or Die Tryin’,'” listed assets and debts ranging from $10 – $50 million. It appears his debts are primarily consumer and not business-related.
He owns a 50,000-square-foot mansion in Farmington.
Trouble for “Fiddy”
The filing comes just days after a jury ordered the artist to pay $5 million for an invasion-of-privacy lawsuit involving Lastonia Leviston. “Fiddy” was sued for posting a sex tape of Leviston who alleged 50 Cent acquired the video she made with her boyfriend and then added himself to it as a crude commentator and posted it online without her knowing about it.
The jury is scheduled to deliberate further on possible additional punitive damages, but the trial may be placed on hold in light of the filing. According to 50’s lawyer, the rapper was absent from his scheduled appearance in court where he was to testify to his fiances because of the bankruptcy filing.
“Mr. Jackson’s business interests will continue unaffected in the ordinary course during the pendency of the Chapter 11 case,” said 50’s attorney William A. Brewer III. “This filing for personal bankruptcy protection permits Mr. Jackson to continue his involvement with various business interests and continue his work as an entertainer.”
When a person files for bankruptcy, an automatic stay kicks in that protects them from creditors and bill collectors, collection agencies, government entities, or other persons that are seeking money. This automatic stay is a powerful tool that can protect people who are behind on child support payments, about to be evicted from their homes, or who are facing large settlement payments.
The lawsuit against the rapper is for a 13-minute video that appeared online in 2009, which features 50 Cent as a wig-wearing narrator with the name of Pimpin’ Curly. During the video, 50 Cent makes explicit remarks about the images being displayed, while also taunting rapper Rick Ross. Though Ross is not in the video, he has a daughter with Leviston who is featured in the video. During the time the video surfaced, 50 Cent and Ross had been trading barbs with each other via lyrics, interviews, and videos.
Allegedly, 50 Cent received the tape from the man in it, Leviston’s boyfriend at the time. While the rapper says he did not post the video, Leviston’s then-boyfriend said she wouldn’t mind if he did.
The Fall of 50 Cent
50 Cent has risen from former crack dealer to one of Forbes Magazines hip-hop’s five wealthiest artists for 2015. Investing in Vitamin Water, 50 Cent has since expanded his business interests to include clothing and audio equipment. He’s gone on to become an actor with credits that include the Starz network action series “Power” and the upcoming boxing movie “Southpaw.”
In 2003 he bought a 17-acre home in Connecticut for $4.1 million. The house, which once belonged to boxer Mike Tyson, has 19 bedrooms, a gym, billiard rooms, and a disco complete with stripper poles. Thought it was listed for sale in 2009 for $10.9 million, it is no longer on the market.
Filing for Chapter 11
When you file for Chapter 11 bankruptcy, you are a “debtor in possession.” This means you are able to keep possession of your property while reorganizing your debts. During this time, your property is considered the “bankruptcy estate.” In other forms of bankruptcy, a trustee is appointed and they take control of the bankruptcy estate.
You remain a debtor possession until one of the following takes place:
- The reorganization plan is confirmed
- The case is dismissed
- Your case is converted to a Chapter 7 bankruptcy, or
- A bankruptcy trustee is appointed
It’s unlikely that if you are filing Chapter 11 that a bankruptcy trustee will be appointed. Typically this only happens if the debtor is possession is deemed incompetent or dishonest by a court, has committed fraud, or has mismanaged the bankruptcy estate.
Since you are in control, you perform many of the duties that a bankruptcy trustee typically would perform. This includes filing required documents with the court. You are also able to hire professionals to assist you and have the right to use, sell, or lease property of the bankruptcy estate.
Just because you are in possession of the debt, that does not mean you are on your own. A US trustee plays a major role in overseeing Chapter 11 cases and makes sure a debtor submits the required reports and quarterly fees. The US trustee is also in charge of monitoring other documents filed with the court, like compensation applications submitted by hired professionals and debt reorganization plans.
The US trustee can also file a motion with the court for the case to be dismissed or converted to a Chapter 7 if he or she feels you are not able to properly administer your case.
Debt Reorganization Plan
A debt reorganization plan and statements on your finances must be submitted to explain how your debts will be paid to your creditors. The creditors will use the financial statements to assess the submitted reorganization plan and decide if it’s fair.
The bankruptcy court must approve your disclosure statement. Following that the creditors vote on the plan. A court then conducts a hearing to approve the plan and handle objections to the plan.
A court will review these factors when deciding to approve a plan:
- It’s compliance with bankruptcy law
- If it has been proposed in good faith
- If the plan is likely to succeed without the need for further financial reorganization
After a plan is confirmed, all the debts that you had prior to the filing are discharged, which means the end of your responsibility for the debt. A debtor is then responsible for making all of the payments that were set forth in the debt reorganization plan. After all the reorganization plan conditions are met, a bankruptcy court issues a final decree that closes the case.
Working with a Bankruptcy Attorney
Bankruptcy law can be hard to understand. Because of this, it’s highly advised that you work with a bankruptcy attorney that can walk you through the process and clarify any questions or concerns you might have. There can be a lot of questions during this extremely stressful time. Let the lawyers at Resnik Hayes Moradi LLP walk you through the process so you can achieve the best outcome possible.