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Thursday, November 21, 2013

Popstar Files Chapter 7 & Bankruptcy Misinformation Reported

Stars file for bankruptcy protection too!  Aaron Carter, pop star and brother to Backstreet Boy singer, filed for Chapter 7 bankruptcy protection.  Yahoo OMG! is spreading news of Aaron's Chapter 7 bankruptcy filing in an article written by Lauren Shutte.  The article gives some history as to how Aaron Carter got into the financial upheaval.  According to Lauren Shutte, the debt was accruing over years, and much of it can be blamed on forces beyond Aaron Carter's control.  This article is spreading misinformation about Chapter 7 by intimating that Aaron Carter will be turning over all of his assets to the Chapter 7 Trustee (including his dog).  The article also misstates the dischargeability of tax debt in a Chapter 7 case.

This is simply not true.  A Chapter 7 is a liquidation proceeding, and the Chapter 7 Trustee does have the power to sell a debtor's assets.  However, Chapter 7 debtors are entitled to certain protections for their personal and real property.  These protections vary from state to state and are provided in the form of exemptions.  Aaron Carter is able to exempt the majority of assets listed in his bankruptcy schedules.  There are some assets which are not exempted or protected.  The unprotected assets include publishing rights to certain songs, a portion of a Brietling watch, and a judgment that was assigned to him.

For assets that are not protected by an exemption the Chapter 7 Trustee will assess whether or not there will be a potential value to creditors if that asset is pursued.  If the Trustee believes that there are assets of value unprotected the Trustee will pursue the assets and administer any funds for the benefit of creditors.  However, in order for the Trustee to pursue an asset it must not be protected by an exemption, and it must have value.  Therefore, Aaron's dog listed with a value of zero will never be picked by the Trustee for sale.

Also, most people who owe more than $20,000 in tax debt will have a lien recorded in the county that they live in.  The result, is that when the bankruptcy case is filed, the taxing authority will have a security interest for plus dollar sum of the value of the assets.  For those in the know, Aaron Carter had to file either a Chapter 7 or Chapter 11 because he exceeded the debt limits for the Chapter 13.  The result of this, for poor Aaron Carter, is that he will not exit with a fresh start, because some of that debt will follow him later, and not dischargeable in the Chapter 7.  Still, we are glad that Bankruptcy can help.  Good luck Aaron Carter!

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