Most people look at hip-hop star 50 Cent’s filing for Chapter 11 bankruptcy protection and can’t imagine how anyone that rich and famous can possibly end up broke. Well, he’s not really broke – not by a long shot – but we’ll sort all that out in a minute.
But you know what gets me? That a guy earning $185,000 a month from royalties and investment interest thinks it’s cool to stiff his debtors to the tune of at least $28 million. How low-class can you get?
In any case, lots of fabulously wealthy people go belly up, so it’s definitely worth understanding why it’s darn common, especially among star athletes, musicians, and actors who come into lots of money very quickly.
Famous examples include Burt Reynolds, Kim Basinger, Willie Nelson, and basketball star Scottie Pippen. My personal favorite is boxer Mike Tyson who, get this, somehow managed to burn through $400 million. As an aside, guess who now lives in Tyson’s old Hartford, Conn., mansion? None other than 50 Cent.
How does that happen? I call it the “easy come, easy go” syndrome. People never value what comes too easily. And by “value,” I mean emotional value. They don’t feel the value, so it’s not really special to them deep down where it counts. And because it doesn’t feel special, they don’t treat it that way.
Think about it. If you grow up with nothing and slowly work your way up to the point where, after 20 years of hard work, you’re making say $250,000 a year, it’ll mean everything to you. With every paycheck you’ll feel the satisfaction of knowing how long and hard you worked to get there. The emotional value is immeasurable.
And since you know there’s no guarantee it’ll keep coming, you’ll pay down your mortgage, minimize debt, save money, and make smart long-term investments. You may never become super rich, but if you continue to work hard for another decade or two, I bet you’ll be comfortable and happy.
Now let’s look at 50 Cent, aka Curtis James Jackson III. Since he was discovered and hit the jackpot with Get Rich or Die Tryin’ in 2003, the award-winning rapper made a fortune on his own record label, on a clothing line, as an actor, and by investing in a vitamin water company that was acquired by Coca-Cola in 2007 for $4.1 billion. Jackson reportedly made $100 million on that last deal alone.
So what happens next? He does what so many do. He starts spending like it doesn’t really matter because, to him, it doesn’t. According to his bankruptcy filing, Jackson’s mansion is worth over $8 million and he owns seven cars, including a Rolls Royce. He spends $108,000 a month on expenses, including maintenance on the estate, security, and of course, his wardrobe and grooming, according to CBS News.
The filing also shows that his businesses lost over $10 million over a two-year period. In other words, he’s got about the same level of fiscal responsibility in his business life as in his personal life, meaning little-to-none.
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Meanwhile, Forbes pegged Jackson’s net worth at $150 million just a few months ago. Which sort of brings us to his financial status and my outrage.
First, understand that there are different kinds of bankruptcy protection. Chapter 7 is liquidation while Chapter 11 is reorganization overseen by the court. Jackson is seeking the Chapter 11 variety.
Chapter 11 bankruptcy protection does not mean you’re broke. You can still have plenty of assets, and indeed Jackson does. It just means you can’t pay all your creditors when debt is due and you want the court to oversee a restructuring plan. Translation: You want to get out of paying some of what you owe.
The events that seem to have triggered Jackson’s filing were the result of judgments against him in two lawsuits. One was for $18 million awarded to Sleek Audio, a former partner of Jackson’s in a headphone deal gone bad, and the other was for $5 million to a Florida woman over a sex tape.
You might think it doesn’t make a whole lot of sense for a rapper to use the same legal instrument to get rid of some of his debt that GM and Kodak used to reorganize their companies, but, actually, it makes complete sense. All three spent way more than they should, made really dumb business moves, and ended up in the same place.
The irony is, the only individuals who lose out are the creditors, not those doing the filing. GM and Kodak emerged from Chapter 11 with clean slates and so will 50 Cent.
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