Money gives you the ultimate power to rule this world. A bitter fact that gets more highlighted at the time of filing bankruptcy.
Just look at the recent case of Curtis “50 Cent” Jackson. The rapper and entertainer has filed Chapter 11 bankruptcy in July 2015 with debts between $10 million and $50 million. But, this is not a big deal for him. A fact revealed through his recent quotes and Instagram pictures. This guy flaunts himself like a millionaire in the pictures. And in a recent interview, Curtis Jackson was quoted saying,
“Walt Disney has filed bankruptcy. Donald Trump has filed bankruptcy.”
He further added, “It means you’re reorganizing your finances, but it does stop things from moving forward that you don’t want moving forward.”
Amongst a few things that can’t be moved forward is the punitive damage Jackson has to pay for posting a sex tape of Lastonia Leviston online.
Like most actors and musicians, Cent Jackson has filed Chapter 11 bankruptcy, in which he can reorganize his assets and debts to pay back creditors through a court-approved repayment plan. Most rich people opt for Chapter 11 bankruptcy simply because it is a convenient option for them. It gives them an option to save their assets.
Cent Jackson is just one example. There are hundreds of rich people who use Chapter 11 bankruptcy as a trump card to dispose of debts accumulated through their extravagant lifestyle. Rihanna, Larry King, Nicholas Cage, NFL players, M.C.Hammer, Michael Jackson, Mike Tyson; the list goes on and on.
A recent study by the National Bureau of Economic Research found that one in 6 NFL players get bankrupt within 12 years of retiring from the league. The figure is little shocking since an average NFL player makes $3.2 million throughout his career. Their huge income doesn’t stop him from filing bankruptcy. And he doesn’t suffer like the ones with few resources after filing bankruptcy. What all these players do is reorganize their assets and get rid of debts. But, if you look at the poor folks, you’ll see a completely different financial picture there.
Read more - Top financial lessons from NFL players who got broke
Being poor is too frustrating especially when you’re bankrupt
Rich people can afford to get bankrupt. They have enough financial means to get over it. But what about those people who struggle every day to put foods on the table?
First of all, poor people don’t have plenty of choices. A few fortunate ones qualify for Chapter 13 bankruptcy whereas others have to strip off their assets and pay back creditors through Chapter 7 bankruptcy.
It isn’t that poor people give a sigh of relief after qualifying for Chapter 13 bankruptcy. Once their proposed plan is approved, they face a hard time in discriminating between the necessary living expenses and disposable income.
In Chapter 13 bankruptcy, people need to use their disposable income to pay back secured creditors within 3 to 5 years. But, there’s no clause that states unsecured creditors should also be paid off. Unsecured debts would be automatically discharged after the completion of post-bankruptcy plan.
The main dilemma of the poor folks is - What is necessary expenditure? Is paying for private school regarded as necessary expense? Texas bankruptcy courts don’t consider it as a necessary expense whereas Florida courts don’t have any problem with it. Just think about the mental condition of the parents. As per the bankruptcy courts’ whims, they’ve to stop sending their kids to private schools for 5 long years. A big sacrifice on the part of both the parents and kids.
Earning power does make a huge difference in bankruptcy
Economic power plays a major role in the bankruptcy. Poor folks are obviously treated differently than the wealthy people. I’ll give you a small example to elucidate my point.
When your monthly income is $2500, and you file for bankruptcy, the bankruptcy court will scrutinize minutely your kid’s soccer lessons and deliberate if this falls under the necessary expense category. But, when your monthly income is $10,000, the bankruptcy court may scrutinize your living expenses little lightly and deliberate less.
It is difficult to say who is right and who is wrong. But one point is clear. Poor folks are not as fortunate as rich guys. It’s quite natural for low-income families to feel that their kids are entitled to soccer lessons just like a family who is making $160,000 a year.
So, the ultimate question is, should poor folks think about filing bankruptcy only after attaining a desirable monthly income? What would those people do who earn just the minimum wage? Should they continue to suffer? What’s the solution? What do you feel? Share your comments guys!
