Contrary to popular perception, bankruptcy isn’t only for people who are just scraping by. Even very wealthy people can get to a point where their assets are outweighed by significant debts.
Take, for example, the case of former Black Eyed Peas business manager Sean Larkin. As part of his contract with the pop group, he was entitled to 5 percent of the band’s earnings. The group’s success earned him millions of dollars in income.
Unfortunately, he has little left to show for it. Larkin recently filed for Chapter 7 bankruptcy. In his petition, he listed estimated debts ranging between $500,000 and $1 million. He blames the debts on a series of bad financial decisions.
Larkin owes a significant amount of money in back taxes as a result of failing to file state and federal income tax returns for several years. He is also facing breach of contract lawsuits suits from a member of the Black Eyed Peas and a television producer. If those suits are successful, Larkin could end up owing the plaintiffs a large amount of money.
Unfortunately for Larkin, these types of debts are sometimes hard to discharge in bankruptcy.
Tax debts can be discharged in bankruptcy only when they meet certain limited characteristics. For example, outstanding income tax debts must be more than three years old and not be related to any form of tax fraud.
Similarly, it can be difficult to discharge judgments from civil lawsuits when the underlying improper act is related to some form of fraud.
Of course, every case is different. If you have questions about whether your debts are dischargeable in bankruptcy, talk to an attorney who can help you understand your options.
Source: Total Bankruptcy, “Former Manager of Black Eyed Peas is Filing for Chapter 7 Bankruptcy,” John Clark, April 24, 2012.
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