- July 30, 2015
- Thomas Adam
- Bankruptcy
In the early 2000s, 50 Cent rapped, ““I don’t know what you heard about me. But a [person] can’t get a dollar out of me.” (We removed the unnecessary explicative.) We will soon find out whether this is true.
The 50 Cent bankruptcy was recently filed and the national (and international) news was flooded with headlines like this: “50 Cent files for bankruptcy”
…and this: this: “Rapper 50 Cent claims he’s broke, laying out $28M of personal debts in federal Bankruptcy Court filing”
…and this: “If you laughed when 50 Cent went bankrupt, you don’t understand hip-hop”
Yet, if you’ve followed 50 Cent over the years, the filing may seem incongruous with some of his enviable financial successes, including:
- Between $40 million and $100 million earned from investing in Vitamin Water
- Acting role in the upcoming movie Southpaw
- Over 21 million units sold from his albums
- Over $175,000 in headphone sales in just 9 minutes
- $78 million underwear endorsement deal
The 50 Cent bankruptcy petition itself lists 50’s assets as between $10 and $50 million. It seems laughable that someone with assets in this range could be considered bankrupt and the social media world is full of jokes on the matter. Many of them are quite funny, but ultimately based on misconceptions of bankruptcy.
The focus of bankruptcy is on providing a tool to help individuals and businesses tackle insolvency, a situation where debts exceed assets. Debtors are not required to have zero assets to file. Filing to help restructure debts to avoid complete, future economic ruin, as long as it is done in good faith, is a perfectly acceptable and common use of the system. 50 Cent’s case is receiving attention because of his high profile.
The 50 Cent bankruptcy filing revealed that his debts are a significant burden, in excess of $28 million, they include:
- $1, 737 owed to his grandfather (a little strange)
- Over $18 million judgment owed to Sleek Audio from a lawsuit
- $ 137,880 for a Bentley lease
- $64, 909 credit card bill
- $568, 304 to one law firm
There’s also the debt that has received the most attention: $5 million owed to the girlfriend of a rap-rival following a jury verdict for invasion of privacy. 50 had released a sex video of the woman, without her permission. As discussed in earlier bankruptcy blogs, the bankruptcy filing triggers an automatic stay, a temporary prohibition on attempting to collect debts from the bankruptcy filer. In 50’s case, this means, he gets to avoid the judgment, temporarily. The woman’s attorney has requested that the bankruptcy court lift the stay as to the judgment, but the court hasn’t ruled on the issue yet.
The 50 Cent bankruptcy was filed under Chapter 11, not Chapter 7. Chapter 7 is most commonly associated with “individual bankruptcy,” and Chapter 11, with “business bankruptcy.” However, for many high asset debtors, like 50, Chapter 11 is often a better alternative. Chapter 11 allows the debtor to restructure their debts and develop a plan for paying them off while Chapter 7 requires liquidation of assets to pay off as many creditors as possible. In contrast to Chapter 13, another reorganization bankruptcy, Chapter 11 is more flexible and does not have debt caps.
Bottom line: for high net worth individuals, Chapter 11 is often the best strategy for preserving assets while paying off debt on more favorable terms. Of course, there is no one sized fits all solution but the Jacksonville bankruptcy attorneys at Adam Law Group can help you determine which solution is best for you.