Rapper 50 Cent filed for Chapter 11 bankruptcy protection last July, but recently he revealed that the initial amount of debt, $28 million, is actually more like $36 million.
Update for 50 Cent’s Bankruptcy
Last July, just days after a New York court ordered him to pay $5 million for a leaked sex tape, 50 Cent decided to file for Chapter 11 bankruptcy protection. “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.
Though the rapper is still making money, one of the main reasons he filed for bankruptcy was due to the protection of the 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.
“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 at the time of the filing. “This filing for personal bankruptcy protection permits Mr. Jackson to continue his involvement with various business interests and continue his work as an entertainer.”
What is a 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.
50 Cent Even MORE in Debt
And now it appears that 50 Cent might be even more in debt than he first claimed.
In his original petition, the rapper listed for his top 20 creditors came to a total of $28,478,920. But now the rapper has filed an amended schedule of his assets and liabilities that list his assets at more than $8.8 million in real estate and $11 million in personal property – which totals to $19.8 million in assets. And after reviewing his debt, the new amount for liabilities come to a total of $36,098,773.
The rapper has also listed his monthly income at $184,000. Of that, $108,000 per month goes to various expenses. Currently he owes $855,000 in domestic support obligations and $1.48 million in taxes and debts to the government.
Deal Reached in April
On April 12 the rapper came to a deal with creditors that stipulated he pay $23 million over the next five years, which equates to around $400,000 a month. This is 74 per cent of what he originally owed.
The proposal has yet to be approved by the bankruptcy judge presiding over the case, judge Ann Nevins.
Photos of 50
Despite the fact that a deal was potentially reached in the bankruptcy case, it appears that the rapper has once again taken to posting pictures of himself acting as if he wasn’t in the middle of a bankruptcy case.
In mid-February U.S. Bankruptcy Judge Ann M. Nevins wondered if the rapper was being outright dishonest and called him back to the bankruptcy court. As she told the rapper’s attorney, James Berman, during that court session: “I’m concerned about allegations of nondisclosure or a lack of transparency in the case.”
“There’s a purpose of having a bankruptcy process be transparent, and part of that purpose is to inspire confidence in the process,” the judge said. She added that bankruptcy court is where “an honest but unfortunate debtor can come into court and seek relief.”
“When that process becomes very public, the need for transparency, I believe, is even higher,” she said.
Additionally, Judge Nevins ordered the rapper to appear in court. The rapper’s legal team issued a statement saying he would appear in court “to make sure that all questions have been addressed.”
Meanwhile, his lawyers assured the judge that “Mr. Jackson has been forthcoming and transparent with all creditors.”
Despite the warning, the rapper continued to flaunt images of himself
And then, just hours after proposing the settlement agreement, 50 Cent was photographed at the Ace of Diamonds strip club in Los Angeles, where he reportedly spent $5,000.
It’s unclear what the next steps will be for 50 Cent – if a judge approves the proposal, 50 Cent’s bankruptcy discharge might be just around the corner.
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 Resnik Hayes Moradi LLP walk you through the process so you can achieve the best outcome possible.