After years of financial mismanagement by others, legendary singer Dionne Warwick has decided to file for bankruptcy. Warwick, who sang “I Say a Little Prayer” and has won five Grammy awards, only recently discovered that she is roughly $10.2 million in debt because of tax liabilities, including interest and penalties for unpaid taxes. New Jersey residents who have heard this news may learn that they are in a similar situation.

As far back as the late 1980s and all the way through the 1990s, Warwick’s financial management was conducted by her business manager. Evidence of fiscal mismanagement can be a shock to people who believe their financial interests are being protected by a trusted party. When a person learns suddenly that their financial health is at risk, it may be too late to repair the damage that has already been done.

In this case, Warwick says that the negligent mismanagement of her finances led to her owing about $1 million in taxes. While trying to pay down the back taxes that accumulated, interest and penalties continued to escalate, making it impossible for the singer to repay the reported $10.2 million she now owes. She had tried over and over to develop a repayment plan with the Internal Revenue Service, but these plans were never accepted.

Even though she has reportedly paid back more than $1.3 million over the years, which is more than was originally owed, that money was put towards the interest owed on the taxes, not the principal amount. Unable to get out from under the mounting penalties, Warwick has decided to file for bankruptcy. According to her bankruptcy counselor, Warwick should not have any difficulty in having her income taxes discharged because they are more than three years old.

Source: The Huffington Post, “Dionne Warwick Bankruptcy: Singer Owes $10 Million In Taxes,” March 26, 2013

• Our New Jersey law firm works with people who are in similar situations involving mounting debt. For more information on how we can help people with debt relief, please visit our page on bankruptcy.