In Bankruptcy News, celebrity bankruptcies

Earlier this month it was reported that Lisa Marie Presley was in debt to the tune of a cool $16.7 million and that her liquid assets were less than $20,000. This came from public records of her ongoing divorce from Michael Lockwood.

According to People Ms. Presley learned of her impoverished status when she was represented by her former financial managers. She has since hired Justin Stiegemeyer and has sued her former adviser, Barry Siegel, who claims that Ms. Presley “squandered her own fortune” through excessive spending.  The lawsuit was reported by theblast.com on February 22. For more on Ms. Presley’s legal and financial woes, see this article.

Whether all this leads to Ms. Presley having to file bankruptcy is anyone’s guess, but if she is leaning that way, she needs to get competent bankruptcy advice. According to the People article, in October Ms. Presley paid off one of three American Express cards that had a balance of $300,000; she paid off a Citi card with a balance of over $111,000 in January of this year; and she expects to pay her remaining credit card debt by September. Following that, according to Stiegemeyer, Ms. Presley “hopes” to start paying on her income tax debt, which is estimated to be “over $10 million.”

Maybe the half million dollars or so paid to credit card debt aren’t a big deal to Lisa Marie Presley. And $500,000 is  only 5% of the $10 million tax debt so in the eternal scheme of things, maybe she views that as a drop in the bucket. But as a simple bankruptcy lawyer, my advice would have been to address the tax issues first.

Why? Because taxes don’t go away; credit card debt can. With rare and narrow exceptions, tax debt is not dischargeable in bankruptcy. The IRS has a long memory and long arms. Every dollar paid to the IRS is a dollar they can’t go after; every dollar paid to credit cards is a dollar the IRS can still try to collect. Ms. Presley may be following the advice of celebrity financial gurus like Suzi Orman, who recommend paying the smallest debts first. Ordinarily that’s good advice, except when it comes to taxes.

Ms. Presley probably wants to avoid bankruptcy — most people do. But sometimes filing bankruptcy is necessary. If she does file, she’ll be in good company with other celebrities who had to file: Tori Spelling, Stephen Baldwin, Nicolas Cage, Toni Braxton, Gary Busey, Burt Reynolds and, of course, 50 Cent.

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