Bankruptcy Lawyer Bryan W. Stone answers the question: “What are the pros and cons of bankruptcy?”
The rapper 50 Cent has been in the news a lot recently, all related to troubles surrounding his pending bankruptcy petition. Thankfully, he may finally get himself off the front page, at least as it relates to his financial affairs.
In a recent filing, 50 Cent’s lawyers announced to the bankruptcy judge presiding over his case that the musician has reached a deal with his creditors that, if approved, would allow him to resolve the bankruptcy case. The exact terms of the deal are still unclear, but broadly it appears to require 50 Cent to make payments of $23 million to his creditors over the next five years.
The money will be spread out among the many people he owes money to, though the largest three creditors are responsible for the vast majority of this debt. These major creditors appear to have agreed to a settlement with 50, evidently deciding that some money is better than the risk of receiving no money at all.
The only thing between 50 and the conclusion of this case is approval from the bankruptcy court judge. Before the deal can officially be closed, the judge must sign off on the plan. This leads to the question of why would a bankruptcy judge ever reject a bankruptcy plan? After all, if the creditors agreed then why shouldn’t the judge? To find out more, keep reading.
The most common reason for a bankruptcy judge to toss out a debtor’s Chapter 13 payment plan is because it is not in the best interest of the creditors. Debtors must not only craft a payment plan that works, but they must also convince the bankruptcy judge that the payments are fair to creditors and in line with what the debtor can reasonably afford to pay.
One way that judges determine what’s fair is they look at what could be obtained by liquidating the sale of non-exempt property, which would occur in the event of a Chapter 7 bankruptcy. If the creditors are getting less than what they would get in such a case it is likely that the court will raise concerns about the plan and possibly even reject it.
Other reasons for a plan to be rejected are if the person filing has failed to provide sufficient documentation of his or her financial condition (including tax returns), if the court believes the person filing has withheld important information about his or her assets or debts or if the person filing is behind on a child support obligation.
Another reason that a plan might be rejected is if the court believes it is too taxing on the debtor. If the court decides that a person would be left with too little disposable income after meeting monthly expenses to make a payment plan a realistic option, then the plan will need to be recalculated. If this happens, either the monthly amount will need to be changed or the duration of the plan will need to be increased.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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