Shawntae Harris better known as rap superstar Da Brat has filed Chapter 11 Bankruptcy this week. Another Famous Rapper 50 Cent also filed bankruptcy in May 2015. What do both of these celebrities have in common? 2 things actually: they both had a high enough net worth to file Chapter 11 bankruptcy instead of Chapter 13 or Chapter 7, and both had financial troubles stemming from lawsuits.
Bankruptcy and Lawsuits
In Da Brat’s case, she lost a lawsuit stemming from an assault charge on former NFL cheerleader Shayla Stevens that took place in a nightclub in 2007. The court ruled in favor of Stevens and awarded her a judgment of $6.4 million dollars. With the new bankruptcy filing, there is a chance that the debt owed will be either eliminate or restructured under the Chapter 11 bankruptcy laws.
Da Brat’s Bankruptcy
Harris filed a voluntary petition for Chapter 11 bankruptcy in late August 2018, claiming assets worth around $100,000 and total liabilities of just over $7.78 million. In addition to the lawsuit, she also listed Sony Music, Ally Bank, and Georgia Department of Revenue.
Chapter 11 for Celebrities
So why is it that celebrities can file chapter 11 bankruptcy while the rest of us must choose between Chapter 7 and Chapter 13 bankruptcy? In certain situations, if one person’s name and likeness IS their business, then assets awarded due to things like entertainment, appearances, and advertising are part of that individual’s “business assets” and can be used to file Chapter 11 bankruptcy. While Chapter 11 bankruptcy can be more forgiving when it comes to repaying creditors from lawsuits, it is a drastically more expensive bankruptcy process compared to a Chapter 7 and can last longer.
The Earner’s Bankruptcy
Contrary to popular belief, it is possible to file for Chapter 11 bankruptcy without being completely broke. As in a Chapter 13 bankruptcy plan, celebrities that file Chapter 11 bankruptcy can have a positive monthly cash flow and still file bankruptcy. Bankruptcy is used when a major debt has occurred such as a lawsuit, illness, or another catastrophe, and the debtor cannot hope to pay it back over 5 or more years. Instead, the Chapter 11 bankruptcy allows celebrities and individuals with high net worth to submit a plan to the US Bankruptcy Court and if affirmed, notify creditors of the new repayment plan.
Bankruptcy is a Right
Congress enacted the US Bankruptcy Laws to reaffirm the right of every individual in America to systematically deal with overwhelming debt. If you are earning money but start every month behind due to expenses or as a result of paying down debt, filing Chapter 7 bankruptcy can help you liquidate any property you wish to sell in order to pay back debtors and eliminate debts from lawsuits and other unsecured debt. Subsequently, Chapter 13 bankruptcy can help you stop all creditors from collecting, in order to create and begin a restructure repayment system to eliminate debt over a 3 to 5 year period.
If you are considering filing a Dayton, OH bankruptcy, contact an Ohio bankruptcy attorney before filing to ensure you are also able to retain your property while fighting lawsuits and various types of unsercured debt.