Back in 2015 I blogged about the infamous Real Housewives of New Jersey Guidice family and their bankruptcy woes, including the potential loss of their home to foreclosure. Now we have another infamous New Jersey resident facing the same dilemma, rapper Lil Kim.
Why Lil Kim Filed for Bankruptcy
Kimberly Jones, aka Lil Kim, is said to be one of the most influential rap musicians of the day. However, that moniker has not helped her to avoid bankruptcy court where she has filed a petition pursuant to Chapter 13 of the Bankruptcy Code in an attempt to save her home. According to the Grapevine, Kim is behind on her mortgage payments on the luxurious home she purchased in 2002 in Alpine, New Jersey. In June, 2018, Kim filed a Chapter 13 bankruptcy, which many familiar with our Bond & Botes blogs know to be a useful tool to help save a home in danger of foreclosure.
The Importance of an Experienced Bankruptcy Attorney
Unfortunately for Kim, she appears to have fallen victim to the same celebrity trap of hiring an inexperienced or bad bankruptcy attorney that Teresa Guidice fell into. The problem for Kim is that the amount of debt that can be addressed in Chapter 13 is limited and her debt exceeded those limits. Under Chapter 13, a debtor may not have more than $394,725 in non-contingent, liquidated unsecured debt and not more than $1,184,200 in non-contingent secured debt. Given that she owes at least $2 million on her New Jersey mansion which is a secured debt, it appears clear she is over the debt limit allowed by Chapter 13. As a result, the next stop for Lil Kim is a request to convert her Chapter 13 case to a case under Chapter 11, which is far more suited to address larger debts.
More Bad News
But that does not end the troubles for Kim. Even after filing for bankruptcy relief, she has been unable to pay the post-petition monthly mortgage payments which have come due since the filing of her case. The bank holding the mortgage on her home has asked the court to be relieved from the automatic stay in order to continue pursuing foreclosure as a result of this failure. Once a Chapter 13 bankruptcy petition is filed, the automatic stay goes into effect with the order of relief being entered on the filing date.
It’s this automatic stay that prohibits the creditors from taking any further action outside the bankruptcy to collect monies that are owed to them from the debtor. The automatic stay is a wonderful tool to give a debtor breathing room to submit a plan to pay creditors in an orderly manner over time. However, the automatic stay is not bulletproof and can be lifted to allow an individual creditor the right to resume collection activities outside of the bankruptcy case.
To avoid the loss of the automatic stay, the debtor must keep the regularly monthly mortgage payment current on his or her home. In a Chapter 13, if the debtor owes a mortgage on his or her home, the regular payments that come due each month after the bankruptcy case is filed must continue to be paid. If these ongoing monthly mortgage payments are not paid, the mortgage creditor will file a Motion for Relief from the Automatic Stay, as it has done in Kim’s case, asking the bankruptcy court to lift the automatic stay so it may begin taking steps to foreclosure against the home.
This story serves as a reminder of how important it is to have a good, experienced bankruptcy attorney at the helm of your case. Bad things can happen in bankruptcy court if you do not. A useful tool to locate an experienced bankruptcy attorney in your area is the website for the National Association of Consumer Bankruptcy Attorneys, or NACBA. Or if you are located in Alabama, Mississippi or Tennessee, please contact one of our locations nearest you for a free, confidential consultation with one of our experienced, licensed attorneys.