Submitted by Rachel R on Fri, 06/20/2014 - 1:34pm
Aaron Carter files Chapter 7 bankruptcy to deal with debt
If you were a teenager in the 90s (or had a teenager in this era), you may know who teen pop sensation Aaron Carter is and was. He began his career as a singer when he was himself just a young tween and soon had young girls swooning all across America. He also has a boy-bander brother, Nick, who gained fame in the Backstreet Boys. He released his first single and album at the age of 10 that went gold in much of Europe and Canada. He was also much sought after eye candy, dating Lindsay Lohan and Hilary Duff at the same time, leading to an epic feud. And now, he's part of our celebrity bankruptcy archives.
As with many young performers, he hit his heyday at a pretty young age and then experienced career fluctuations. He and his siblings starred in a one-season reality show on MTV – House of Carters. In 2009, he dipped his toe into reality TV again with a stint on Dancing with the Stars, where he finished in a not-too-shabby fifth place. There were obviously troubles brewing beyond the financial ones as Carter did a one month rehab session at Betty Ford.
He has since done some off-Broadway work, small concerts and one-off shows that led to a tour in 2013 that sold out, albeit at modest-sized venues. But with not a lot of earnings coming in, money troubles are inevitable and Carter filed Chapter 7 bankruptcy in October of 2013. In his filing, he listed just $8,200 in assets and an incredible $2.2 million in liabilities, with just under $2,000 per month in income with outgoings of nearly the same amount (which means he was not able to service his debts at all).
Under these circumstances – when you (or any pop star or celeb) have far more debts that you can hope to pay on your current income and no anticipated hike in income coming – filing Chapter 7 makes sense. This is preferable to letting debt, interest and fees continue to pile up or filing Chapter 13, which isn't usually practical when the debts so clearly outweigh assets and income, like in Carter's case.
His assets seem typical for a single male under 30 – a flat screen TV, laptop, printer, clothes and a nice watch. But his debts are far from typical for such a young man. Carter owes nearly $1.4 million to the IRS, $32k to American Express, attorney and accountant fees, overdue utilities, almost $600k to Live Nation for touring and business expenses and past due rent.
This is clearly unmanageable on $2k per month in take home pay even though his expenses are modest with just $700 a month for rent, utilities and food. What's disturbing is that most of his debt seems to have been incurred before he was an adult. Carter's representative said, “The overwhelming majority of the debt he is asking to have discharged is from more than 10 years ago when he was a minor and not in control of his finances.”
The tax debt alone indicates this is true. He hasn't been earning enough income as an adult to generate taxes of that amount, but was when he was a minor. What's worse is that he wasn't managing his money or career back then, it was his parents. These are parents he's had to take to court for mismanagement of finances and has obtained a judgment against, but will likely never see payment for the money they frittered away.
Most consumers won't ever be in a situation like Carter's where your money is out of your control and in the hands of managers or parents. But what can happen is that often in a marriage, one partner has control over the money and may not always manage it well. In fact, money matters are usually better dealt with by both partners together so there is full disclosure and two minds considering how money should be spent and saved.
If you're deep in debt, have mostly unsecured bills like credit cards and medical bills and not a lot of income coming in to pay what you owe, Chapter 7 may be an ideal get-out-of-debt tool for you like it was for Aaron Carter. Contact the law offices of John T Orcutt for a free consultation on filing a North Carolina bankruptcy.
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