A federal bankruptcy court judge has given preliminary approval to a statement that details rapper 50 Cent’s assets of nearly $20 million. 50 Cent, real name Curtis James Jackson III, who is known as 50 Cent, is set to pay millions of dollars in payments to settle claims by creditors.
50 Cent Soon to Settle Bankruptcy Case
Judge Ann M. Nevins, who has presided over the case that was opened July of last year, praised lawyers, saying they had worked “very hard to reach a compromise mechanism.”
Now it will be up to creditors to vote on a reorganization plan.
Proposed Plan
The proposed plan lists assets including 50 Cent’s $8.25 million Farmington house, cash and securities valued at $10.6 million. According to a disclosure statement claims against 50 Cent are valued at $32.6 million. A** disclosure statement** provides creditors with “adequate information” about a debtor’s affairs to allow them to make an informed decision about any proposed reorganization plans.
The proposed plan calls for 50 Cent to pay roughly $23.4 million over a period of five years. The rapper will have to pay 70 percent of the proceeds of a $17.2 million malpractice claim against lawyers. That comes to $12 million.
The plan also resolves pending litigation and liquidates three unsecured claims against the rapper that were brought by his three largest creditors: Sleek Audio LLC, Lastonia Leviston and SunTrust Bank Inc.
According to the disclosure statement, 50 Cent “believes that reorganization under the plan is feasible and that the plan provides for the greatest recoveries” for the claim holders.
50 Cent’s bankruptcy has be littered with controversy, most recently as a result of the rapper’s Instagram account that displayed pics of him literally rolling in dough.
50 Cent Answers to Questions About Instagram Photos
In early March, U.S. Bankruptcy Judge Ann Nevins asked 50 Cent to appear in court after three of his creditors brought it to her attention that the rapper was posting pictures of himself among literal towers of money. In one photo, the rapper laid on the floor next to the word “B-R-O-K-E” spelled out in stacks of cash. In another photo, he appeared to be lying on a bed surrounded by cash.
As the creditors’ lawyers explained, they felt that the rapper had not properly disclosed all his assets, including payment from concerts he has given since declaring bankruptcy, and also the house that he claimed, via Instagram, to be building in Africa.
During a hearing at the time, Judge Nevins expressed her concerns about the on-going bankruptcy case. “I am concerned about this case,” she said. “The statements in the disclosure statement are specific and inflammatory. And I feel the court needs to address them, directly, with debtor’s counsel, the creditors in the case, the office of the U.S. trustee. And I feel it may be necessary for the debtor to be present.”
50 Cent’s Bankruptcy Lawyers
Despite her concerns, and the photos depicting multiple thousands of dollars, 50 Cent’s lawyers and his creditors maintain that “All his income has been reported,” according to rapper’s lawyer, James Berman. “He’s current on his operating reports.” While Nevins expressed during the hearing that she was glad to hear this, she still wanted “to understand what’s going on in this case. I’m concerned about allegations of nondisclosure or a lack of transparency in the case.”
Explanation of Photos
As 50 Cent’s lawyers explained the rapper “is in the entertainment and promotion business and must maintain his brand and image (or those of the products he is promoting).”
But the photos aren’t the only part of the bankruptcy that has raised a few questions. Namely, the reason behind 50’s filing has raised the most eyebrows.
50 Cent Files for Bankruptcy
50 Cent filed for Chapter 11 bankruptcy protection July 13, 2015. Under Chapter 11, a debtor restructures his or her finances through a plan of reorganization. While Chapter 11 is usually filed by businesses, if a debtor’s assets are worth more than a certain amount they can choose to file for Chapter 11. But it seems the reason for filing for 50’s filing of Chapter 11 is rooted in the legal protection of an automatic stay.
Automatic Stay
An automatic stay is a motion that protects debtors from all people that are seeking money, including damages. An automatic stay can be a great form of protection for those who are facing paying large settlement payments. Automatic stays are also initiated when you file for bankruptcy.
Following the filing, 50’s attorney William A. Brewer III made this statement: “Mr. Jackson’s business interests will continue unaffected in the ordinary course during the pendency of the Chapter 11 case. This filing for personal bankruptcy protection permits Mr. Jackson to continue his involvement with various business interests and continue his work as an entertainer.”
Chapter 11 Reorganization Plan
A debtor typically has four months after filing Chapter 11 to propose a reorganization plan. These four months are usually considered exclusive, meaning that the debtor has the exclusive right to come up with the plan. This plan can also be extended or shortened.
After that “exclusivity period” expires, the creditors’ committee is able to propose a reorganization plan, although this is rare. Typically if creditors are dissatisfied with the debtor’s proposed plan, it will move to dismiss or convert the case to Chapter 7.
Confirmation of Chapter 11 Plan
Once a plan is approved it is referred to as “confirmation.” For a Chapter 11 plan to be confirmed, the plan must meet a number of requirements, including:
Feasibility. The proposed plan must be likely to succeed. This means that a debtor must be able to prove to the court that it will be able to raise enough revenue to cover its expenses over the plan term. This includes making all payments to creditors.
Good Faith. The plan must be proposed in good faith and not by means forbidden under applicable law.
Best Interests of Creditors. The plan must be in the best interests of its creditors. This means that creditors will receive as much in Chapter 11 as they would have if the debtor had gone through Chapter 7. Sometimes this means that a debtor will be required to pay creditors in full rather than just a fraction of what is owed.
Fair and Equitable. The plan must be deemed “fair and equitable” under the “fair and equitable” test. This means the following must be met:
- Secured creditors (creditors that have a mortgage against real property or a lien against personal property included inventory or equipment) must be paid, over time, at least the value of their collateral.
- The debtor is not able to retain anything on account of their equity interests unless all debts are paid in full. These debts can either be paid immediately following the confirmation of the plan, or over time. If paid over time, interest must be included. The bankruptcy court is able to allow equity holders (creditors) to retain ownership interests in the debtor in exchange for any “new money” that is contributed to pay expenses associated with reorganization of the debt. If this is not enabled by the court, equity holders lose all ownership rights once the reorganization plan is confirmed.
Some of the confirmation requirements apply only if the creditors vote against the proposed reorganization plan.
Working with a Bankruptcy Attorney
Attorney Ben Wright has the experience, skill and knowledge necessary to guide you through steps involved with a Chapter 11 bankruptcy. We will thoroughly review the financial situation of your business and if Chapter 11 is appropriate, prepare the petition and required schedules and documentation required by the bankruptcy court, including:
- Schedule of assets and liability
- Schedule of current income and expenditures
- Schedule of executory contracts and unexpired leases
- Statement of financial affairs
For individual filers, we will also provide a certificate of credit counseling and evidence of payment from employers, along with a statement of monthly net income and anticipated changes.
After filing the petition and schedules, we will then prepare and submit the disclosure statement and plan of reorganization with the bankruptcy court. The disclosure statement, which functions similar to a prospectus, must provide sufficient information about the business for creditors to make informed decisions about the debtor. The plan of reorganization — where there “rubber meets the road” — sets out the payment sequence, including priority of creditors, payment amount and timing. The confirmation process can be very time-consuming and energy-intensive, but you can take assuring knowing that attorney Wright will provide reliable and dedicated counsel every step of the way.
Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix chapter 11 bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.
AZBK Lawyers 668 N. 44th St., Ste 320, Phoenix, AZ 85008 (602) 648-3274