It looks like Erin Andrews’ stalker, Michael David Barrett, will still need to pay his portion of the $55 million that is owed to the Dancing With the Stars co-host even after declaring bankruptcy.
Bankruptcy Won’t Help Erin Andrews’ Stalker
This past March, Erin Andrews, a co-host on Dancing With the Stars was awarded $55 million for damages in a civil suit against stalker, Michael David Barrett. Barrett was ordered to pay 51 percent of that $55 million. Barrett pleaded guilty to secretly taping Andrews while she was getting undressed in her hotel room and then posting the video online. Barrett received a sentence of two and a half years in prison and three years of probation for interstate stalking. He then filed for bankruptcy the year he was released from prison.
It’s not uncommon for people to file for bankruptcy following civil suits in which large amounts of money are ordered to be paid. But a judge has now decided that the damages that Barrett must pay to Andrews are “non-dischargeable,” and thus cannot be forgiven by declaring bankruptcy.
Why Bankruptcy COULD Have Cleared His Obligations
Barrett might have been eligible to discharge his debt through bankruptcy had the debt been ruled as dischargeable. Bankruptcy is often declared following large settlements due to the fact that when a person initiates bankruptcy proceedings, the first thing to take place is an automatic stay. 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.
Being in debt can be an overwhelming experience that can feel insurmountable and impossible. But those debt situations can become dire when you are faced with foreclosure, repossession, wage garnishment, eviction or other creditor action. If this is the situation you find yourself in, you might want to consider filing an emergency bankruptcy filing.
Timing of Automatic Stay
An automatic stay goes into effect immediately after you file for bankruptcy. This is why it’s so helpful in dire situations when your house is about to be foreclosed on, or a debtor tries to collect payment from you, or your car is about to be repossessed. You can stop that process from happening as soon as you file your emergency bankruptcy. During that bankruptcy period you will need to work with an attorney to help figure out next steps to reconcile your debt.
Exceptions to Automatic Stay
There are exceptions to automatic stays. An automatic stay will not stop every type of collection, and it also does not apply to every situation. You need to be well versed on these exceptions before you file because these actions will continue regardless of the fact you’ve filed for bankruptcy. That means that even if you have filed for bankruptcy or emergency bankruptcy, you will still need to either make payments, or continue with certain kinds of legal action. An automatic stay does not mean an automatic break from these responsibilities or legal actions.
The following are not protected or halted under an automatic stay:
Divorce and Child Support:
- child support and alimony payments will still need to be paid
- being able to collect back child support and alimony from property that is not part of the bankruptcy estate
- actions to determine child custody and visitation
- actions to establish paternity
- actions for modifying child support and alimony
- actions to legally protect a spouse or child from domestic violence
- withholding income or garnishing wages for the collection of child support
- the reporting of overdue support to credit bureaus
- interception of tax refunds to pay back child support, and
- the withholding, suspension, or restriction of a drivers’ and/or professional license as leverage to collect child support.
The IRS will still be able to continue certain actions, including:
- tax audits
- the issuing of a tax deficiency notice
- demanding tax returns
- issuing tax assessments
- demanding payment for an assessment
An automatic stay does not prevent a debtor’s income from being eligible for withholding in order to repay a loan from an ERISA-qualified pension. This type of pension includes most job-related pensions as well as individual retirement plans.
There are also ways that you can lose the protection offered during an automatic stay.
Losing the Protection of an Automatic Stay
Don’t assume that once you get an automatic stay, you are in the clear. There are still things you will need to stay aware and in control of.
You can lose the protection if one of the following apply:
- you had a bankruptcy case already pending within the year before you file your current case. In this case the court can refuse your request to allow the stay to kick in.
- you do not adhere to the deadlines set out in the bankruptcy code. These deadlines are set for dealing with property that is used as collateral for a secured debt.
While an automatic stay will typically stop a pending eviction, there are two exceptions:
- Your landlord obtained a judgment for possession prior to your bankruptcy filing. Some states will allow for your stay to be reinstated if the judgment was due to the fact you were unable to pay rent.
- The landlord is evicting you because you endangered the property or illegally used a controlled substance while on the property.
Last Note: Creditors are also allowed to request that the bankruptcy court remove the automatic stay. In these cases, the court often grants the creditors the ability to proceed with their actions against you.
Filing for Chapter 11
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.
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 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.
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 asses 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 RHM LAW LLP walk you through the process so you can achieve the best outcome possible.