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Chapter 13 one option for debt reorganization

Many Arkansas residents are familiar with the rap star known as 50 Cent. The musician made recent headlines after he was sued for releasing a video online, showing a woman engaged in sexual acts. She sued, and the outcome of that civil suit was in her favor. However, before the jury could determine the level of monetary compensation that she is due, 50 Cent filed for Chapter 11 personal bankruptcy. Chapter 11, much like Chapter 13, is often sought as a means of financial reorganization.

In this case, the rapper claimed debts of nearly $28.5 million. Those obligations included personal loans by family members, a variety of household charges and an automobile lease. A large portion of that debt is also tied to an arbitration agreement with Sleek Audio.

By filing for Chapter 11, the civil hearing to determine an award amount was halted. However, the legal team for the other party asked the court to allow that hearing to move forward, and that request was granted. The bankruptcy judge stated that the rapper is attempting to use his bankruptcy filings to move the civil matter into another court. The timing of the filings (a business owned by the rapper also recently sought bankruptcy protection) was also called into question.

According to the paperwork filed with the bankruptcy court, 50 Cent has an estimated $24.5 million in assets. As the bankruptcy case moves forward, a percentage of those assets will be used to repay his creditors. It is entirely possible that the woman who won her civil suit against 50 Cent will receive little or no money. While many feel that such a move is not morally correct, the fact remains that Chapter 11 and Chapter 13 bankruptcy actions are a perfectly legitimate means of reorganizing debt, and they are a savvy financial move for many in Arkansas and beyond.

Source: Hartford Courant, "Federal Judge Says 50 Cent Sex-Tape Case Can Proceed Despite Bankruptcy", David Owens, July 17, 2015

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