Chapter 11 isn't made to protect rich people from having to pay their debts, says Lawyer Hunter Shkolnik |claims 50cent isn't broke!
Let’s get the obvious comparison out of the way first. Both Dick Fuld, the former CEO of Lehman Brothers, and 50 Cent left some folks who had key financial relationships with them feeling very shortchanged.
Lehman Brothers and 50 Cent have something else in common, too: There were questions about whether they were really broke even though they both filed for bankruptcy.
The rapper’s bankruptcy filing came at an interesting time. In the last 12 months, 50 Cent lost a pair of lawsuits that could cost him nearly $25 million.
If 50 can’t come up with the cash, he might have to start selling his assets off to pay his creditors — just like Lehman had to do in the wake of the financial crisis. Eight years after the crisis, the bankrupted bank continues to pay off creditors through asset sales.
It’s an ironic twist for a man who poses on Instagram flaunting hot cars and jewels — and who released the track “Window Shopper” in 2005 to mock other rappers lacking his substantial means. 50, however, just had to testify in court that he actually returns much of the high-end booty he has been spotted wearing online.
On July 24, that indebtedness increased. A jury ruled that 50 Cent would have to pay out an additional $2 million to a woman whose sex tape he published on the internet. Despite his defense team’s fervent attempts to characterize him as penniless, a jury of 50’s peers just wouldn’t buy the idea that he was broke and here’s why:
Hunter Shkolnik, a lawyer for one of the parties suing 50 Cent, points out that in 2014 the rapper cut a $29 million loan to his production company G-Unit. On top of that, he’s also kept current on his bills. Besides the two lawsuits totaling nearly $25 million in judgments against him, 50 is only about a half-million dollars in the hole, according to Shkolnik.
Still, confusion surrounds the state of 50’s finances. His own accountant wasn’t aware of the $29 million loan the rapper made to the production company he owns and couldn’t recall who purchased rights to $3 million worth of 50 Cent’s songs.
“The real joke is the $29 million,” Shkolnik told Business Insider, adding that the legal team opposing 50 Cent brought it to the judge’s attention, as it was not included in his initial filing.
“We called him out on it and the judge agreed,” Shkolnik said. “It’s going to show up in bankruptcy court. He’s not bankrupt; he’s not broke. Chapter 11 isn’t made to protect rich people from having to pay their debts.”
Interestingly, Fuld claimed Lehman Brothers wasn’t technically broke despite its bankruptcy filing. Fuld’s public claims came in May, when he spoke at a conference in New York and delivered an inexplicably spirited defense of his time at Lehman Brothers that culminated in the firm’s bankruptcy filing.
“I have always said, and now it’s being proven. Lehman Brothers in September 2008 was not bankrupt,” Fuld said in his defiant speech.
Fuld’s speech didn’t sit too well with his former colleagues. Regardless of whether Fuld’s claims are accurate, his colleagues lost much of their life savings when Lehman collapsed.
For their part, the lawyers opposing 50 Cent insist he is attempting to prove he is insolvent to duck the obligations via his own bankruptcy filing. He dodged a proverbial bullet because the judge overseeing his bankruptcy didn’t try to force him into Chapter 7 bankruptcy. This could have led to his entire estate being immediately liquidated to pay off his creditors, including the people he owes.
The rapper initially filed for bankruptcy and will have more hearings in the state of Connecticut, which allows people to file for Chapter 11 bankruptcy or Chapter 7 bankruptcy. Chapter 11 is typically used by people like 50 Cent who have a lot of assets but not the cash to immediately pay off creditors. Chapter 7 is used by people who are out of assets and out of money, who have to liquidate everything just to pay back creditors pennies on the dollar.