On July 13, 2015, Curtis Jackson, aka "50 Cent," filed a chapter 11 bankruptcy. A Chapter 11 bankruptcy allows a debtor such as 50 Cent to restructure his debt obligations while keeping important assets. It appears that 50 Cent is using the bankruptcy as a way to negotiate down a $5 million dollar judgment against him.
The bankruptcy allows him to use the automatic stay of the US Bankruptcy Code to prevent collection of the recent judgment against him. This provides him with the freedom to continue using his assets while holding his creditors at bay until a suitable repayment plan is approved by the bankruptcy court. While you you may not have the $10-50 million in assets and debts that 50 Cent is claiming, the same basic principles of bankruptcy can apply to any debtor. A sudden job loss or judgment can wreck financial havoc on a person's life. Bankruptcy can help stop any creditors from pursuing further collection activity. This can help a person create a plan for repayment (Chapter 13) or allows a person to simply get a fresh start (Chapter 7). A Chapter 13 Bankruptcy can be useful if you have significant assets or equity that you need to protect. In that scenario, the asset can be protected if you pay back its value to the creditors. For example, if you own a home worth $660,000 and have a mortgage balance of $550,000, then you have $110,000 in equity. In a Chapter 13 Bankruptcy, you would be required to pay the unexempt equity you have in the home. In California, your homestead exemption can be up to $100,000. Therefore, of the $110,000 of equity available in the home, only $10,000 would be exposed to creditors. In such a case, only $10,000 would be required to be paid to the creditors in order to keep the home over a 3-5 year period. That amounts to about $175.00 per month. The above scenario is a simplified example. There are additional factors that apply to how much is to be repaid during a chapter 13 bankruptcy. As such, I recommend that you speak to an attorney before filing bankruptcy.
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