The Bankruptcy of Toni Braxton & The Return of Debtors’ Prison
By Jay Anderson on Oct 14th 2010 2:21PM
Filed under: Celebrity News, Personal Finance, News
I’ve never quite understood how some famous folks get themselves in deep debt. Sure, many of them probably put too much trust into accountants who may be shady or not experienced with dealing with huge sums of money, but still. Common sense would dictate that you pay Uncle Sam first, then pay yourself a reasonable amount and live within your means.
Somebody needs to remind R&B singer Toni Braxton about this:
More than 10 years after a dispute over her recording contract led Toni Braxton to file for bankruptcy, the singer has returned to bankruptcy court.
In her Chapter 7 bankruptcy petition, filed in Los Angeles on Sept. 30, Braxton reported assets in the range of $1 million to $10 million and debts in the range of $10 million to $50 million. Under Chapter 7, an independent official will be appointed to round up Braxton’s assets, sell them off and distribute the proceeds to her creditors.
Braxton has quite a few creditors, court papers show. Among them are the Flamingo Las Vegas hotel and casino, the Four Seasons Hotel in Washington, D.C., Neiman Marcus, the Screen Actors Guild, RCA Music Group and various other entertainment-related companies. Tiffany & Co. was also on the list. (The Wall Street Journal)
Jimminy Christmas, how exactly do you get yourself $50 million dollars in the hole? I suspect that there are far more details than those listed in this story, but the creditors noted show a not-so-wise pattern of spending. I can see falling behind on a mortgage, or second mortgage, or medical bills, or maybe, just maybe a car. But some of the items being reported just don’t make sense. Cell phones? Satellite TV? I’d think small potatoes items like that would be the first things to go if you were strapped for cash. How much pay per view was Miss Braxton ordering? I liked ‘McGruber’ myself, but not $50 million worth. Come on, Toni. Was it worth it? Or maybe she did not know the risks today of not paying even small amounts of debt. Contrary to popular belief, yes, you can indeed be sent to jail for outstanding personal debt.
Yes. It is true. The trend of sending people to prison for debt is on the rise. Here at BV on Money Lynnette Khalfani-Cox, The Money Coach, covered the return of debtors’ prison in June, and the trend continues to grow. Recently an Illinois man was sentenced to “indefinite incarceration” until he paid $300 toward a debt he owed to a lumber yard. (How he will pay if he can’t earn money in jail is a good question.) According to Newser.com, the collection industry is now turning to civil courts, using taxpayer money and government resources to pursue “low level deadbeats.” What does this mean for regular people and stars like Ms. Braxton?
We all know that the rich and famous are subjected to different types of justice, and that Ms. Braxton has filed for bankruptcy protection which should ease her repayments of her debts. At the same time, The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes it more difficult than ever for people to erase consumer debt. Her lawyers might have to work extra hard to get her out of debts for things like cell phones and satellite TV.
Related:
+Deep in Debt? You Could Get Locked Up
+Toni Braxton Files for 2nd Bankruptcy
Without enough money, Braxton might not be able to fight that fight. Reports state that she still has $1 million to $10 million dollars — but that’s a big range. If it’s closer to $1 million, Braxton could have a problem. TMZ just reported that lawyers working on Michael Jackson’s estate have racked up bills totaling $5,185,757. One bill alone is $1,259,289. So dealing with this bankruptcy issue could actually do even further damage to Ms. Braxton’s wealth through lawyers’ fees — and BAPCPA might prevent her from being protected from all of her creditors. If she can’t pay enough for good lawyers, might Toni face the same fate as the man thrown in the clink over a mere $300? God forbid it, but this is something that she and many other Americans may be facing.
