On Monday morning, The Wall Street Journal reported that 50 Cent filed for Chapter 11 bankruptcy protection, and, as always, Twitter has had plenty of jokes.
Many people are assuming he is flat broke — especially in light of a recent lawsuit in which a jury ordered him to pay $5 million to a woman who sued over a sex tape that was posted without her permission. And his boxing promotions company, SMS Promotions, filed for Chapter 11 bankruptcy back in May. But that's probably not exactly the case.
In the court docs, his assets and debts were each listed in the range of $10 million to $50 million — which automatically puts him into Chapter 11 territory based on the monetary amounts. Typically Chapter 11 bankruptcy simply means a reorganization of one's assets and debts — which isn't saying they haven't been poorly managed up until now for 50 — but in light of the recent lawsuit against Lastonia Leviston, the mother of Rick Ross' child, this will give him some time to repay that $5 million.
A few hours ago, 50 Cent's attorney, William A. Brewer III, partner at Brewer, Attorneys & Counselors, issued the following statement to Variety: "This filing for personal bankruptcy protection permits Mr. Jackson to continue his involvement with various business interests and continue his work as an entertainer, while he pursues an orderly reorganization of his financial affairs."
We hopped on the phone with Robert Gregg, president of Mainline Partners in Brooklyn, to break down exactly how this Chapter 11 filing works.
Brian Ach/Invision/AP
Can you explain Chapter 11 bankruptcy protection in a general sentiment?
In a general sentiment, you usually file a Chapter 11 when your assets are worth more than a certain amount. In this case, 50 would not have been eligible for Chapter 7 or 13 because his debt is more than $390,000 in unsecured debt.
He would automatically need to do Chapter 11, and here's where the protection comes in — so you've got debt, and a lot of times it's looked upon negatively, but there can be multiple reasons. One could be, "I've got more debt right now than I have income coming in, can we work together a plan of protection to restructure?" Now the protection comes in because once it's filed there's a mainstay where typically 90 to 120 days or somewhere there abouts, you're putting together and formulating a plan of how you're going to pay back your creditors. The majority is personal credit, not business. That could be one reason.
They're reporting that his assets in debts each are in the range of $10 million to $50 million, so that alone put him in Chapter 11.
Oh yeah, definitely.
This is coming after he was ordered by a court to pay $5 million to a woman who sued him over leaking a sex tape a few years ago. Would that be something that would factor in here?
It most certainly factors in, and I would imagine that's probably a big reason why. Another reason is, from what I understand, to seek protection because, I believe he has a boxing-promotion company that may have recently filed for corporate protection. To further protect you individually and especially coming after this particular case you file a Chapter 11. Under that holding, no one can come after you — there can be no liens, no coming after you, no more judgment so to speak, and the idea behind it is to say, "We’re going to go back now and through my attorney we're going to go to court and do a restructuring."
Through that restructuring you have to share your assets and liabilities, so what's expected to come in, so to speak. Here's the thing, the restructuring plan takes almost two years to be approved, so if you're a creditor and you're sitting out there you're waiting eight months to a year, 16 months to get paid.
And in that plan you might think, "Well, you know what, 50 owes $2 million, I'll take a half a million now," and that might be the same thing with the judgment. If you have a young lady who's been awarded $5 million and now her attorneys are billing her, he may want to milk that out a little bit. There may be something else that comes from behind it.
Let me give you a different scenario. A Chapter 11 bankruptcy goes into a debt-restructuring plan. The plan takes 18 months to get approved, and the attorneys try to convert this from a Chapter 11 to a Chapter 7. Now you’re talking about up to five years in which everything gets approved. You kind of look to string it out and hope that in that time the companies who you owe step back.
Some of the companies may go out of business. I don’t know the extent of Mr. Jackson's debt. I understand the majority is consumer debt, which consumer debt typically tends to be from lawsuits or he wants to be shielded from lawsuits. It might be loans, lines of credit, bank cards, and things of that nature, which is mostly consumer debt. All of the above could be factors to which he voluntarily [files], and that’s another key: You have to voluntarily file Chapter 11 to be eligible later on to do a conversion.
People tend to think that when anyone in the entertainment world files for bankruptcy that they have no money. That's not the case.
No. Look at Donald Trump. I think Donald filed for bankruptcy on multiple occasions. It's not because the person has no money so to speak. A lot of times they may have entered into an agreement which at the present moment may not be favorable. If you've got a line of credit that has a high interest rate, we're talking a good amount of money, but if rates have dropped considerably and you're paying a high amount of interest, you may say, "Let me go back to the bank or whoever loaned me the money and see if we can restructure."
They may say, "No, we had a deal in place, you've got to honor that." If it behooves you, then maybe you may file for bankruptcy because now you don't have to pay and now almost willingly your creditors will go back and say, "We'll take something since it doesn't appear like we may get paid the full amount," or we may go back and say, "Hey, the previous contract we had was X amount of dollars paying 15%, let's lower the percentage to 5%."
It works out for you, it works out for them. In this particular case it's usually not that the person doesn't have money, it's preventative. Usually preventative. You almost have to show that you're not capable of maintaining your debt or your requirements. You have to show that if we keep going on this track at some point I'm either going to run out of money or you know what I don't have the income right now to support all of my obligations, so I'm looking to restructure and the bankruptcy is an option in which to do so.
I doubt it's because he's sitting with $5 in his bank account.
Read the original article on Complex. Follow Complex on Facebook. Copyright 2015. Follow Complex on Twitter.
Read more: http://www.businessinsider.com/50-cent-filing-for-bankruptcy-does-not-mean-hes-broke-2015-7#ixzz3fvOG42PL
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