Many of us dream of living the life of the rich and famous. With all that money, what problems could we possibly have? Well, one look at the tabloid magazines will tell us a different story, but for those of us facing mounting debt, trading in our money problems for tabloid problems might not sound so bad.
Unfortunately, the old saying, “more money, more problems,” may be true in some cases. Take the news that star Toni Braxton recently settled her 2010 chapter 7 case for $150,000.00. Apparently the reason it took so long for Toni to settle her case was a dispute over assets. After listing over $50 million of debt, Toni was paid for a performance, receiving $754,000 in compensation. The chapter 7 trustee in her case wanted the star to turn over that money to her creditors. Toni’s attorneys advised her not to, using the bankruptcy code as a defense. In a chapter 7 bankruptcy, the date of filing the petition is extremely important. With the exception of the right to an inheritance or life insurance policy, anything you receive after filing for bankruptcy is yours as long as you had no right to the asset at the time of filing.
However, there is a statutory mandate that the debtor must file the bankruptcy case in good faith. This generally means that the debtor must tell the truth about their income, assets and debt and that the filing is not done to merely hinder or delay the collection rights of creditors. I am suspecting that the dispute between Toni Braxton and the chapter 7 trustee revolved around a good faith argument. If Toni filed bankruptcy and then immediately performed a concert and received close to one million dollars in compensation, the trustee probably argued that the timing of the filing was bad faith. Whether or not the trustee would have been successful in that argument is up for debate. Instead of going to trial over the matter however, Toni and the Trustee decided to settle their differences with Toni paying $150,000.00 to the bankruptcy estate to close her case.
Now, while the money at issue here is generally much more than what is normally seen in a chapter 7 context, the underlying issues are the same. In a complicated chapter 7 case, what assets belong to the bankruptcy estate and what assets the debtor is entitled to keep can often be a point of contention. Usually in these situations, settlement with the trustee is a good idea, because often times you don’t want a debtor with a lot of assets in front of the judge on a bad faith argument. If you are a debtor in this situation, it is important to have good legal representation in the form of an experienced bankruptcy attorney who knows both the bankruptcy code and the local judicial culture. This knowledge will be invaluable to you as you decide whether to take the case to trial or settle.
Although Toni Braxton’s case is an extreme example of the issues that can take place in a bankruptcy, her reasons for filing bankruptcy are similar to those reasons many people find themselves considering bankruptcy. After struggling for years with lupus and heart diseases, it was her health concerns that led her to cancel performances in Las Vegas and according to her led to her mounting debt.
The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code
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