NEW YORK (MainStreet) -- The rapper 50 Cent’s name took on a whole new meaning yesterday when the hip hop star filed for Chapter 11 bankruptcy protection in Connecticut courts. Though Forbes recently estimated he had assets worth $155 million, 50 Cent, whose real name is Curtis James Jackson III, claims in court documents he has both assets and liabilities in the range of $10 million to $50 million, including a $5 million judgment against him recently awarded to Lastonia Levinston in a dispute over a leaked sex tape.
The filing came within days of the jury’s decision in the Levinston case.
In filing for bankruptcy, “Fitty” joins a long history of boom and bust celebrities who hit it big at a young age then burned through their cash almost overnight.
For rappers, like athletes, success often comes early and with big expenses. Cars, homes and other trappings of an A-list lifestyle add up, and pretty soon even multi-million dollar paydays such as 50 Cent’s stake in vitaminwater aren’t enough to pay the bills.
According to Chicago attorney Adam Holguin, Chapter 11 bankruptcy will allow 50 Cent the opportunity to reorganize his debt and finances with the goal of eventually paying the majority of his debts.
Chapter 11 “doesn’t mean you’re broke” Holguin said; in fact, it's quite the opposite. Unlike Chapter 13 bankruptcy, which involves paying creditors sometimes pennies on the dollar with what few assets a debtor has left, or Chapter 7 bankruptcy, which seeks to liquidate debt entirely, Chapter 11 allows filers the opportunity to restructure their debt and find cash-flow solutions while suspending collection.
To compare the forms, Chapter 11 bankruptcy focuses on reorganizing debt with the goal of eventually paying most of it off, while Chapters 7 and 13 focus on discharging it entirely.
The filing speaks to an enormous amount of outstanding liabilities for the rapper.
It also, Holguin emphasized, speaks to the kind of protection offered by the bankruptcy system. Chapter 11 is typically sought by companies, emphasizing the fact that Jackson operates his personal finances as much as the 50 Cent brand as an individual.
Bankruptcy protection creates the opportunity for people to take risks, Holguin said. Whether it’s a family buying a dream home or a multi-millionaire opening a new recording label, the bankruptcy code creates incentives by ensuring a way out if things go badly enough.
“My clients don’t think of it as free money,” Holguin said. “It’s taxed them far more than what they owe emotionally… Most of these individuals have struggled for a while to preserve not filing and have just come to the conclusion that they can’t avoid it.”
Of course, Sleek Audio won a suit over 50 Cent for more than $16 million in 2014 over using the company's intellectual property in his SMS Audio headphones. That loss and his new liabilities have driven him to find shelter in bankruptcy law.
"It’s the risk of him being able to make business decisions, knowing that worst case scenario he can file and have his debts reorganized," Holguin said. "It allows some entrepreneurial spirit, it allows people to take risks knowing that if they take these risks and it doesn’t pan out it can be reorganized.”
Filing for bankruptcy protection will allow 50 Cent to manage major debts, including outstanding lines of unsecured credit and payments on secured property like homes and cars. It has also, for the time being, halted progress on Levinston’s lawsuit. In other words, she can't get a dollar out of him.
Jackson was due in New York state court on Monday to determine whether punitive damages should be added to the $5 million award against him. Although filing for bankruptcy protection generally suspends collection on outstanding lawsuits, Holguin pointed out that the law also requires an element of good faith generally considered under “look back” provisions.
That means creditors and the courts look for “a pattern of abuse” in bankruptcy filings, Holguin said. If creditors believe that a debtor is acting in bad faith, they can request that the court look back and exclude certain debts from bankruptcy protection -- for example, if a creditor ran up enormous, unusual expenses on several credit cards shortly before attempting to have that debt liquidated.
In the case of a wealthy musician who files for protection immediately after getting a $5 million judgment against him, according to Holguin, the motivation is crystal clear: to shirk, if momentarily, paying what he owes. Levinston’s attorneys may ultimately request that the bankruptcy judge exclude the current lawsuit from protection, based on allegations that Jackson is using Chapter 11 to interfere with and delay Levinston's lawsuit.
In May, Jackson put his promotion company SMS Promotions, LLC into bankruptcy as well, also reportedly due to the Levinston lawsuit.
In filing for bankruptcy, 50 Cent puts himself in good company. Financial troubles are commonplace among rappers, many of whom make their fortunes young. Here are just a few that have gotten into trouble that way over the years:
The Boom: A rapper and the flagship artist at Cash Money Records, L’il Wayne grossed more than $30 million from his recent tour alone. Some estimates suggest that his net worth is currently as high as $140 million in 2015.
The Bust: That hasn’t kept him all the way out of financial trouble though. According to TMZ L’il Wayne skipped out on his taxes in 2008, 2009, 2011 and 2012, owing the government over $19 million by the time all was said and done. Oh, and he forgot those 1040s in 2004, 2005 and 2007 too. Weezy might be doing all right these days, but he might want to be careful… sooner or later the IRS gets prickly about these things.
The Boom: Platinum albums and TV appearances, not to mention getting to drop her first name in favor of an apostrophe. L’il Kim was huge for a while, especially in the early 2000s, if not so much anymore.
The Bust: Unfortunately, accounting problems seem to follow the L’ils. Like Wayne, L’il Kim got herself in trouble for owing well over $1 million in back taxes… and for failing to pay her taxes every single year from 2002 through 2009. It’s one thing to get a rep as an outlaw, but perhaps rappers might want to remember what happened to the last famous bandit who messed around with the IRS.
The Boom: From "Beautiful Girls" to "Take You There," Sean Kingston has had a few legitimate hits. With an unconfirmed personal net worth of around $2 million at one point, the young singer broke out big in 2007… and never seemed to get much more successful. But hey, for every one hit wonder out there, another million of us settle for singing in the shower.
The Bust: Life is rough when you’ve making the Daily Mail for unpaid rent, as happened to Kingston a few years back. The $70,000 lawsuit from a former landlord started several years of financial woes that don’t seem to have ended yet and have led to not one but two repossessions: first his Mercedes, then a Bentley.
The Boom: Scarface has had a prolific career, from music to production and even writing. Described as “your favorite rapper’s favorite rapper,” Scarface never had the world beating success of a L’il Wayne but did seven figures of fine for himself.
The Bust: Until it came time for child support. In 2013 the rapper was jailed for ten months for failure to pay more than $123,000 in back child support. Although he claimed to have made the payments, on four separate bonds, he couldn’t provide evidence of having done so and couldn’t pay up on the spot.
The Boom: Dupri was the man that brought us Kriss Kross back in the 90s. Maybe not necessarily a good idea, but certainly a profitable one, and Dupri used that success to launch So So Def Recordings. At his peak Dupri was worth a whopping $60 million personally, not counting his company, and worked with artists such as Usher and TLC.
The Bust: These days Dupri is worth… much, much less than that. After losing his $5 million home to repossession in 2014, according to the site Celebrity Net Worth, today Dupri is supporting himself with a multimillion dollar bank loan. Blowing that line of credit isn’t an option either; apparently it’s secured with literally all of Dupri’s personal possessions.
The Boom: Who doesn’t know what hammer time means? In the 80s and 90s MC Hammer was one of the biggest names in the business, getting so huge as to actually claim ownership to his own style of nightmarish pants. With a net worth of over $30 million according to one Forbes estimate, he proved that for him the early years of hip hop were indeed 2 legit 2 quit.
The Bust: Perhaps the only hip hop artist whose downfall spurred more jokes than 50 Cent’s, everything from “I guess you can touch this” to… well, pretty much just that in about a million different forms. Starting with a catastrophic tax lien (seriously, rule one for new hip hop artists, get a decent accountant) and exacerbated by an entourage that reportedly cost him $500,000 a month, Hammer’s bankruptcy became the stuff of legend.
The Boom: His rap success -- and even the island sound team-up with Damien Marley -- brought in big money, to the tune of $17 to $20 million (depending on who you ask). In a career with such records as Illmatic to production success, Nas built himself into a big name over several decades.
The Bust: Taxes. Again. Like so many of his colleagues, Nas seems to have launched a blood feud with the accounting industry and several years ago found himself in a very, very deep hole with the IRS. In 2011 he faced a tax debt of nearly $6.5 million, more than most people will make in their entire working lives. Adding insult to injury were five figure debts to his ex-wife and child, as well as evidently a mountain of unpaid condo association fees. Fast forward to 2015, and apparently the problem still isn’t over.