The rapper 50 Cent, also known by his birth name Curtis James Jackson III, filed for a Chapter 11 bankruptcy on Monday. The bankruptcy petition was filed in a Connecticut bankruptcy court, and the documents showed Jackson’s total assets were valued in the range of $10 million to $50 million. What is unique about 50 Cent’s filing is that he filed under Chapter 11 rather than filing a Chapter 13 bankruptcy.
So what is a Chapter 11 bankruptcy? A Chapter 11 Bankruptcy is mainly filed by small businesses and allows the business to restructure its finances through a repayment plan approved by the court. Large businesses like General Motors and Carmike Cinemas have also filed for this type of bankruptcy. Generally, a Chapter 11 repayment plan allows a debtor to balance its income and expenses, regain profitability, and continue to operate as a business in the mean time.
When a business declares bankruptcy it must follow the rules and requirements of the bankruptcy court to discharge its debts. A Chapter 11 bankruptcy may also be filed by a “small business debtor,” which is a person or entity who: 1) is engaged in business or other commercial activities; and 2) owes no more than $2,490,925 in total claims.
Usually a person who does not file a Chapter 7 bankruptcy will file for a Chapter 13 bankruptcy, which allows the debtor to repay their debts through a repayment plan similar to the method of repayment used in a Chapter 11 bankruptcy. An individual is required to file a Chapter 11 bankruptcy when he or she has a significant amount of assets. If an individual has more than $336,900 in unsecured debt or $1,010,650 of secured debt, then he or she cannot file a Chapter 13 bankruptcy and must file a Chapter 11 bankruptcy instead. The principal difference in the reorganization plan is that a Chapter 13 plan can vary between 36 months and 60 months, whereas a Chapter 11 plan must be 60 months long.
So why did 50 Cent declare bankruptcy when he has an estimated $50 million in assets? The answer isn’t quite clear from his bankruptcy petition, but the answer should reveal itself when he files his schedules For more information on the benefits of filing a Chapter 11 or 13 bankruptcy, contact the Law Office of David M. Goldman PLLC at 904-685-1200.