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'Disarray' in DMX's Chapter 11 could force transfer to Chapter 7

Earl Simmons, the rapper known as DMX, filed for Chapter 11 reorganization in July, but he’s not getting much relief -- and it’s not the first time. The performer tried filing for bankruptcy in 2009, but that case was dismissed by the bankruptcy court after it found DMX had “unreasonably delayed” the case to the detriment of his creditors.

This time, a U.S. Bankruptcy Trustee has accused the artist not only of continuing that pattern but also of making things worse. She said in a motion to the court that DMX’s filings are “in disarray” and so full of inconsistencies that the artist has “eroded the confidence of the Office of the United States Trustee and others that the debtor will be candid in the disclosure of his assets.” Moreover, he didn’t show up at a meeting of creditors last month.

The Trustee has moved to have the rapper’s Chapter 11 forcibly converted to a Chapter 7 filing in which DMX could be forced to liquidate his nonexempt assets in order to pay off creditors. Alternatively, she recommended this bankruptcy be dismissed.

The alleged inconsistencies in DMX’s Chapter 11 filings include one filing reporting his monthly income at $5,000, while another listed it as $1,667. Also, a list of his personal assets claimed he owns $0 in clothing, yet a schedule of his monthly expenditures said he spends $1,000 on clothes every month.

In addition to his troubles with the Trustee, a former booking agency sued DMX earlier this month for allegedly taking thousands of dollars in pre-tour advances and then failing to show at the gigs. The artist’s attorney denies he received any of the advances mentioned in the booking agency’s lawsuit and wasn’t involved in those transactions.

The attorney had no comment on the Bankruptcy Trustee’s motion to dismiss the bankruptcy or force its conversion to Chapter 7. A U.S. Bankruptcy Court in New York will consider that issue at a hearing Dec. 5.

Filing for bankruptcy can bring a great deal of relief to debtors and, with proper planning by a qualified attorney, most people end up losing few or none of their assets -- even in Chapter 7. It’s crucial, however, to file properly and to claim all applicable bankruptcy exemptions to protect your assets. “Disarray” is not to any debtor’s advantage.

Source: The Wall Street Journal's Bankruptcy Beat blog, "DMX in Hot Water with Bankruptcy Watchdog," Jacqueline Palank, Oct. 22, 2013

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