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Rapper’s Bankruptcy Filing Does Not Stop Trial in Civil Lawsuit from Moving Forward

By Alex Const (originally posted to Flickr as 50 cent) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons50 Cent, the well-known rapper, producer, actor, and entrepreneur, filed a bankruptcy petition in July 2015, claiming nearly $25 million in assets and about $32 million in debt. At that time, he was involved in a civil lawsuit in New York that was about to go to trial. Within days of the bankruptcy filing, however, the plaintiff in the New York case had obtained an order from the bankruptcy court lifting the automatic stay and allowing the trial to proceed. The case is notable to us for at least two reasons. First, it demonstrates that a person does not need to be “broke,” or completely out of money, to need bankruptcy protection. It also illustrates how the automatic stay, which comes with any new bankruptcy petition, does not guarantee a lengthy respite from pending legal matters.

“Bankrupt” Does Not Equal “Broke”

Filing for bankruptcy does not necessarily mean that a debtor has no money, although this unfortunately remains a common misconception. In the present case, the debtor’s lavish lifestyle led to numerous public comments and jokes at his expense, but it is entirely possible to have millions of dollars in assets and still go bankrupt. It merely requires a large amount of debt and income that, however high it might seem to most people, is insufficient to pay that debt.

The Automatic Stay

The New York lawsuit, originally filed in 2010, included claims for intentional infliction of emotional distress, defamation, and violations of the New York statute prohibiting the use of a person’s name or likeness. This is commonly known as the “right of publicity.” See Cal. Civ. Code § 3344. The plaintiff alleged that the debtor had posted a “sex tape” of her, to which he had added his own narration, on the internet without her permission. She withdrew her defamation claim in late 2013, but the court denied a motion to dismiss the remaining claims.

According to media reports, the debtor made several attempts in 2015 to delay or defer a trial in the case, including a Chapter 7 bankruptcy filing and removal of the case to federal court. Neither effort was successful, and a federal judge was harshly critical of the debtor in a June 2015 order remanding the case to state court. A state appellate court declined to grant a stay of trial on two occasions, in mid-June and early July. A jury awarded the plaintiff $5 million in damages after a trial in early July. As the jury was preparing to continue deliberating on the issue of punitive damages, the debtor filed for Chapter 11 bankruptcy on July 13.

The plaintiff in the New York lawsuit quickly filed a motion to lift the automatic stay, which took effect immediately upon the debtor’s filing of his petition. 11 U.S.C. § 362. The debtor filed an objection, and the bankruptcy court held a hearing on July 17. It ruled in favor of the plaintiff, who is a creditor in the bankruptcy proceeding. The punitive damages phase of jury deliberations moved forward, and on July 24, the jury awarded her an additional $2 million.

Since 1997, Los Angeles bankruptcy attorney Devin Sawdayi has helped individuals and families find their way out of financial distress through the Chapter 7 and Chapter 13 bankruptcy processes. To schedule a free and confidential consultation with a knowledgeable, experienced, and compassionate financial advocate, contact us today online or at (310) 475-939.

More Blog Posts:

Los Angeles Court Affirms Penalties for Willful Violation of Automatic Stay in Chapter 13 Bankruptcy Case, Los Angeles Bankruptcy Lawyer Blawg, September 18, 2015

Bankruptcy Court Considers Whether to Lift Automatic Stay for Foreclosure-Related Proceedings, Los Angeles Bankruptcy Lawyer Blawg, May 11, 2015

Violation of Automatic Stay Can Result in Emotional Distress and Punitive Damages, According to Ninth Circuit Ruling, Los Angeles Bankruptcy Lawyer Blawg, April 12, 2015

Photo credit: By Alex Const (originally posted to Flickr as 50 cent) [CC BY 2.0], via Wikimedia Commons.