Rapper Lil Kim Files for Bankruptcy
Financial troubles seem to hit the wealthy just as frequently as the average working American. In a news scoop from last month, TMZ reported that famed rapper Lil Kim filed for bankruptcy protection in New Jersey. As reported in court documents, Kim is up to her eyeballs in debt to the tune of $4 million. This debt includes $2 million for her home and an unpaid tax bill that is almost as large–$1,845,451.74. Kim also reported legal bills totaling $186,000.
Because Kim filed for Chapter 13 bankruptcy, she has proposed a repayment plan which includes monthly payments of $5,500. Her monthly income is reportedly $18,286. Hopefully Kim’s new solo album, which will be released this year, will help her dig out of debt.
Why Did Kim File for Chapter 13 Protection?
Many consumers file for a Chapter 7 bankruptcy, which allows debtors to wipe out most unsecured debt, including credit card bills, personal loans, and medical debt.
However, as listed above, most of Kim’s debt stems from her mortgage. A Chapter 7 rarely helps here for a couple reasons:
- In a Chapter 7, the trustee can sell your non-exempt assets, including real estate. The proceeds from the sale go to your unsecured creditors.
- A bankruptcy cannot eliminate a security interest in property like a mortgage. This means the lender can still foreclose on you.
By filing for Chapter 13 protection, Kim will not lose her home. Instead, she will reorganize her debts by contributing disposable income each month to her creditors for several years. At the end of this period, any unpaid unsecured debt can be discharged. Also, filing stopped any foreclosure action in its tracks.
As reported by the New York Daily News, saving her home was a primary concern for Lil Kim. Her home was schedule to be sold at public auction only a few days after she filed for bankruptcy protection. She has now asked the judge for permission to convert her bankruptcy to a Chapter 11, which will give a high-income person like her more flexibility for repaying debt.
Considerations for Florida Debtors
Lil Kim filed for bankruptcy in New Jersey. Although bankruptcy is fairly standard around the country, a key difference is how states define exempt property.
In a Chapter 7, the trustee can sell non-exempt assets. Fortunately, Florida residents can often exempt the entire value of their homes in bankruptcy. This might make a Chapter 7 more attractive than a Chapter 13 for Florida residents. Although you can’t wipe out your mortgage, you can eliminate other debts that could free up money to get back on track with your mortgage lender.
Considering Bankruptcy? Nowack & Olson Wants to Hear from You!
Debtors considering bankruptcy need to carefully choose which bankruptcy to file and when. Unfortunately, many of our clients are pressed for time, usually because a lender is about to foreclose on their home.
At Nowack & Olson, we aren’t afraid to jump into a crisis and figure out a game plan for helping our clients get back onto sound financial footing. To learn more, please schedule your free initial consultation by calling toll-free, 888-813-4737. One of our Plantation bankruptcy attorneys will be happy to talk to you.