Chapter 11 Means 50 Cent Could Be Broke
Just because Donald Trump filed for Chapter 11 bankruptcy does not mean that filing for Chapter 11 bankruptcy is a consequence free event that is a sign of good financial health. It is a sign of where your business stands at the point in time you file for Chapter 11.
When Lady Gaga filed for bankruptcy in 2009, she has 3 million dollars to her name that she invested in her tour. She had no money to her name, with music and appearances everywhere. She had to file for bankruptcy to hold off her creditors. Live Nation wrote her a check for 40 million as they were the proceeds from her tour. She was no longer broke.
50 Cent filed the legal documents three days after he was ordered to pay Lavonia Leviston approximately 5 million dollars when a jury determined the rapper had intentionally acquired an X-rated video she made with her boyfriend, added himself as a crude commentator and posted it online without her permission to embarrass his rap rival Rick Ross, who fathered a child with the woman. This is not good. It’s not bad, but it’s certainly not good.
50’s finances have been mismanaged and debt has piled up until it became too overwhelming for him to repay. His business will operate under a budget supervised by the court, a trustee, and creditors. The cost of Chapter 11 is significant for every business, even 50 Cent, although the magnitude of that cost differs significantly.
As an individual, creditors can’t force 50 to go into Chapter 11 bankruptcy so that the court will take control of his finances unlike a business. At the same time, 50 can still continue generating revenue while getting his finances and assets in order.
Filing for Chapter 11 bankruptcy means stockholders receive nothing once the bankruptcy is completed. As such, they lose all of their rights to the company and its assets because the creditors take control of the company to retrieve monetary losses they have incurred, and retain the business’ profit-making capabilities.
Chapter 11 may be worthwhile if 50 and his team can articulate a plan to restructure, or even liquidate, going in. If he filed Chapter 11 and then started thinking about how to reorganize his finances, he is wasting his time and apparently limited money. He’s also wasting his time, money, and in violation of court rules, if he has filed Chapter 11 just to delay his creditors. If he hopes that a miracle will occur and something will turn up: he’ll find a buyer, investor, or lender then he is in trouble.