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Girls Gone Wild Founder Joe Francis Has Bankruptcy Court Troubles

Girls Gone Wild founder Joe Francis is in deep trouble in bankruptcy court.  Girls Gone Wild filed for Chapter 11 bankruptcy protection in February 2013.  Shortly thereafter, Francis agreed not to interfere in the company’s business.

As the company continued to operate under the court’s supervision, Francis was accused over the following months of various misdeeds.  These include making threats to employees, hiding company cars, transferring intellectual property to another company, and having his girlfriend block the bankruptcy court trustee’s access to the building.  Eventually, an injunction issued requiring Francis to stay 100 feet away from the company’s headquarters.

In April 2014, the bankruptcy court ordered company assets sold for over $1.8 million.  In May, Francis and his girlfriend allegedly came to the company’s headquarters and screamed obscenities at employees, resulting in the police being called.  A second occurrence followed a few days later.

A motion for contempt was filed against Francis for ignoring court-ordered sanctions.  At the hearing, Francis argued that the 100 foot-injunction no longer applied after the company’s assets were sold.  He also argued that company employees were the aggressors when he visited the office in May.  The company cars, he claims, were seized outside of a Mexican strip club and he cannot get them back.

The Bankruptcy Court Judge, Sandra Klein, did not buy Francis’s argument and found that the injunction was violated.  She ordered Francis to immediately return the vehicles or pay the clerk $5,000 a day for each day they remained missing, and pay $41,000 in attorneys’ fees and costs.

In a document filed with the court, Judge Klein stated that ” the facts of this case justify issuing arrest warrants as a coercive sanction for civil contempt.”  Because current case law is murky on whether or not a bankruptcy judge has the power to issue an arrest warrant, she referred the matter to the District Court.

Should Francis be arrested, it would not be his first time behind bars.  He was sentenced to jail last year following convictions for a 2011 incident of false imprisonment and assault.

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Chapter 7 Basics

Do you need a lawyer in the Knoxville area to help you with a Chapter 7 bankruptcy?  Chapter 7 is the most common bankruptcy filed by individuals with primarily consumer debt. Chapter 7 is sometimes referred to as the “fresh start” bankruptcy option.  Many people who qualify for a Chapter 7 can have their unsecured debt discharged without losing any assets.  How do I know if I qualify for a Chapter 7?  Generally, there are two ways to qualify for Chapter 7 bankruptcy. The first is to earn below the median income for a Tennessee family of equivalent size. Income will include any earnings from employment or other sources, including contributions to household expenses from others.  Even if you make over the median income for a family your size, that does not necessarily mean that you won’t qualify for Chapter 7. Under the Bankruptcy Code, you may still qualify depending on your monthly expenses and the amount of surplus income that you have left over.  Your attorney will use the information you provide about your income and expenses to complete a Means Test to determine if you are likely to be successful in filing a Chapter 7 bankruptcy.  Do you need a Knoxville bankruptcy attorney for a Chapter 7 bankruptcy?  Call us today for a free consultation with an attorney.

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Happy Anniversary, Detroit Bankruptcy

Detroit’s historic bankruptcy was filed on July 18, 2013, one year ago today.  When the bankruptcy was filed by emergency manager Kevyn Orr , the city was nearly $20 billion in debt.  In the five preceding years, the city spent an average of $100 million more than it brought in.  Orr had failed to reach agreements with creditors to restructure Detroit’s debt outside of court and believed that bankruptcy was the best option.

In a December 2013 ruling following a nine-day trial, Judge Steven Rhodes declared Detroit eligible to proceed with Chapter 9 bankruptcy.  He held that the city met all factors for insolvency, was unable to pay its debts, and was unable to provide a minimum level of basic services to residents.

Opponents of the bankruptcy had argued that the city did not negotiate in good faith with creditors, particularly those retired city workers receiving pensions.  Those workers also argued that their pensions were protected by the Michigan state constitution.

In February 2014, Orr filed a proposed plan of adjustment in the city’s bankruptcy case. The plan called for spending $1.5 billion over the next ten years on improvements to the city, including blight removal, technology upgrades, and infrastructure repairs.  The investments aimed to prevent further population loss and revitalize the city once known as the Paris of the West.  The plan’s impact would be felt heaviest by non-uniformed city retirees, who would see their pensions cut by nearly one-third if the plan was approved.  The plan would spare pensions for police and firefighters somewhat, with those pensions cut by only ten percent.

In April 2014, Detroit reached a settlement with a large group of unsecured bondholders.  In June 2014, Michigan lawmakers passed a series of bills with bi-partisan support to allocate $194.8 million for Detroit in a one-time influx of money.  The bills help alleviate cuts to the city’s pensioners and insulate artwork at the Detroit Institute of Arts from sale.  The bills also indemnify the state from lawsuits relating to the bankruptcy filing and provide for a nine-member committee to oversee the city’s finances, budget, and contracts.  The state’s contribution added money to the $366 million already pledged by charitable foundations and the $100 million pledged from the Detroit Institute of Arts.

City employees and retirees were given an opportunity to vote on Orr’s plan of adjustment, and the results will be announced on July 21.  Next, Judge Rhodes will hold a hearing in August and rule whether or not to accept the plan of adjustment.

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Restitution Is Not Discharged in Bankruptcy

Section 523 of the Bankruptcy Code provides that a Chapter 7 discharge does not include debts for “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny” nor does the discharge include debts that are for a “fine, penalty, or forfeiture payable to and for the benefit of a governmental unit.”

A Michigan woman recently sought to discharge a large restitution debt owed to her former employer.  The former Kentwood parks clerk was convicted of  fabricating reservations for city parks, canceling the reservations, and refunding the money into her own pockets.  Upon her sentencing, she was ordered to repay the city $331,000 as restitution.

After filing Chapter 7 bankruptcy with her husband, she argued that the city would recover the money from insurance payments and that she should not have to pay the money back.  The bankruptcy judge denied her request.

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Bouncing Back (Fashionably) From Bankruptcy

Fashoin designer Michael Kors is the embodiment of the self-made success story.  He designed and sold clothing from a very young age.  He set up a fashion boutique in his basement at the age of 11.  Working in a department store in sales, he ended up designing the store’s clothing line.  He started his own women’s clothing line in 1981.

Going through a Chapter 11 bankruptcy in 1993 did not deter the designer.  Chapter 11 provides (generally) for reorganization, usually involving a corporation or partnership. A Chapter 11 debtor proposes a plan of reorganization to keep its business alive and pay creditors over time.

The designer expanded into the realm of reality television in the early 2000s.  He served as a judge on the television show “Project Runway” for ten seasons, known for his fair but rigid comments towards the contestants.

His company went public in December 2011.  Earlier this year, his fortune topped $1 billion.  Once just sold in department stores, the Michael Kors brand is now found in stand-alone stores around the world.  From fragrances, women’s shoes, men’s shoes, eyeglasses, and handbags, the classic staples of the line appeal to many.  In fact, a quick office survey here at The McKellar Law Firm, PLLC found a pair of coral platforms and a patent handbag.  The Kors story illustrates that massive success is sometimes punctuated by the restructuring or shedding of debt.

 

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Tennessee Woman Sentenced to Prison For Bankruptcy Fraud

Tennessee woman Janet Brown was sentenced on Thursday to one year in federal prison for bankruptcy fraud.

Accused of participating in a Ponzi scheme along with her late husband Jack Brown, the only charge against Ms. Brown to date is the bankruptcy fraud charge, to which she entered a guilty plea in February.  That Ponzi scheme was allegedly run under the guise of Brown’s Tax Service in Soddy Daisy, and defrauded investors of $12 million.  Many local residents say they lost their savings in the scheme.  A group of the investors filed an involuntary Chapter 7 bankruptcy against the couple.

The bankruptcy fraud charge stems from a question at Ms. Brown’s 341 Meeting of Creditors in which she was asked under oath if she had turned over all of her jewelry to the Chapter 7 trustee.  Ms. Brown said that she had except for the three pieces she was allowed to keep (her wedding band, high school ring, and mother’s ring).  The Trustee produced photos of her wearing missing diamond jewelry.  Three days after the meeting, Ms. Brown delivered a bag of jewelry later appraised at $25,000 to her attorney, who was bound to turn it over to the Trustee.  Her lie about her assets at the 341 Meeting was the basis of the bankruptcy fraud charge, which can carry a sentence of up to five years and a fine of up to $250,000.

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Michigan Bill Will Send $194.8 Million to Detroit

Michigan lawmakers passed a series of bills with bi-partisan support on Tuesday with the goal to help reach a settlement of Detroit’s bankruptcy case.  The bills allocate $194.8 million for Detroit in a one-time influx of money.  The bills will help alleviate cuts to the city’s pensioners and insulate artwork at the Detroit Institute of Arts from sale.  The bills will also indemnify the state from lawsuits relating to the historic bankruptcy filing and provide for a nine-member committee to oversee the city’s finances, budget, and contracts.

Tim Sowton of Business Leaders for Michigan stated “We are dedicated to making Michigan a top 10 state for jobs, and to get there we need our largest city at its best.”

The bills are on their way to Governor Rick Snyder for approval.  He stated, “This is what bipartisanship is all about.  This was about great teamwork.”

Opponents of the bill held strong opinions, such as this one from Senator Coleman Young of Detroit opposing the state oversight of the city’s finances: “This bill is like me at Buffalo Wild Wings. Once you let them in you never leave.”

The state’s contribution would add money to the $366 million already pledged by charitable foundations and the $100 million pledged from the Detroit Institute of Arts.

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Dr. Dre Fights For a Claim in Death Row Records Bankruptcy Case

Dr. Dre’s Beats Electronics headphones company may soon be sold to Apple in an acquisition worth billions.  However, the recording artist recently had bad news from the bankruptcy court where Death Row Records’ case is pending.

Dr. Dre and Marion “Suge” Knight were co-founders of the record label, but after a falling out Dr. Dre left to form Interscope Records.  Dr. Dre claims that during the split from Death Row Records, an agreement was reached for Dr. Dre to receive royalties and sales from his album The Chronic.

The bankruptcy case of Death Row Records and Suge has been pending since 2006.  Dr. Dre is involved in the bankruptcy case as a creditor. He claims he is owed over $3 million dollars for royalties and sales allegedly earned from the digital release of The Chronic between 2006 and 2009 by the company that bought part of Death Row’s musical catalog in the bankruptcy.

The bankruptcy judge dismissed the request, ruling that Dr. Dre failed to allege certain facts necessary to support the claim and also based in part on the fact that issues regarding the oral contract for royalties had already been litigated.

The bankruptcy trustee has $6.3 million available to distribute to creditors.  The judge approved a plan for the trustee to begin making payments to creditors last week.

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Meet the Parents Star Files for Bankruptcy

Meet the ParentsMeet the Fockers and Little Fockers star Teri Polo has filed for bankruptcy with three quarters of a millions dollars owed to the IRS and over $35,000 in credit card debt.

Polo filed for Chapter 11 bankruptcy, a reorganization bankruptcy that can be similar to a Chapter 13 filed by an individual.  A Chapter 11 bankruptcy petition can be filed voluntarily, or may be an involuntary petition filed by your creditors.  A disclosure statement of assets, debts, and the business affairs of the debtor is filed in a Chapter 11.  A reorganization plan is filed as well, which details how claims will be treated and paid.  Creditors and the court have input on the contents of the  reorganization plan before its final approval.  In most Chapter 11 cases, no Trustee is appointed and the debtor retains control of their bankruptcy estate.  The debtor must comply with reporting requirements during their case.

Although media reports state that Polo is best known for her roles as Ben Stiller’s other half in the Focker movies, she is also known as a star of the final season of the greatest television show ever, Northern Exposure.  She currently stars in the ABC Family television show The Fosters.

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Bankruptcy And The Booty At The Bottom Of The Sea

The SS Central America mail steamer sunk in a shipwreck off the coast of North Carolina in 1857.  In addition to the tragic loss of life of 477 passengers, the ship was carrying millions in gold bars, coins, and ingots.  The loss of gold was so large it contributed to the Panic of 1857.

In the late 1980s, treasure hunter Tommy Thompson and his company raised millions from central Ohio investors to finance an exploration of the location.  The investment paid off:  the ship was found along with more than three tons of treasure estimated to now be worth between $100 and $400 million.  A small portion of the treasure was brought to the surface and sold.  However, the expedition and its financiers soon ran into turbulent waters.

In the years since, investors and crew members have sought their share of the fortune.  Numerous lawsuits have been filed, alleging that no return on the investment was ever distributed.  Thompson’s attorney admitted in court in 2013 that no investors have been paid yet.  Thompson has failed to attend court dates for the past seven years and has a warrant out for his arrest.

One of the largest investors in the exploration, the Columbus Dispatch newspaper, sought the appointment in 2008 of a receivership to manage the company’s finances.  Then, a group of creditors, including a former attorney for the company, filed an involuntary bankruptcy petition against the company in 2013.  The Dispatch argued that the bankruptcy was orchestrated simply to avoid the appointment of a receiver.  Fortunately for the paper, the bankruptcy court judge lifted the automatic stay to allow the state court receiver proceedings to continue.  The bankruptcy case was ultimately dismissed in September 2013 at the request of the receiver.

In the latest news in the shipwreck saga, Odyssey Marine Exploration of Tampa, Florida has been hired to retrieve the remaining treasure from the ocean floor.  Court-appointed receiver Ira O. Kane oversaw the hiring of Odyssey, which was approved by a Franklin County, Ohio judge in March.

Under the terms of the contract, Odyssey will pay for the archeological excavation, recovery of the gold, and ship conservation.  In exchange, it will receive a sliding percentage of the recovery profits.  The operation is scheduled to begin this month.

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