Earlier in the year we talked about celebrity bankruptcy. We all wondered how celebrities could lose all their money and end up in bankruptcy court. At the time Alex made the post, TMZ reported that child star Drake Bell was filing for bankruptcy due to his high expenses. Now, another celebrity has filed for bankruptcy, but this time it is the creditors whose actions are shocking.
Joe and Teresa Giudice, famous for their crazy antics on the reality TV show "Real Housewives of New Jersey", have been battling their bankruptcy case for years. The couple has been involved in many financial troubles, including a bank fraud case that will cause them both to head to prison.
What I found absolutely flooring was the amount of debt they had--- over $13 million!! They just recently paid off the creditors. They were able to pay a whooping $7,500 to ALL the credits. Professor Ayer tells us how unlikely it is for unsecured creditors to get at the money. In this case, the Giudices couldn't even come close to paying a portion of the secured creditors. Five different banks each had secured loans of over a million dollars. One of the banks, Wachovia Bank, has a secured loan for $5.3 million.
The couple had no equity in any of their belongings. The $1.7 million dollar house they live in has only $140,000 of equity. There other two "vacation properties" have zero equity. The other pieces of personal property they own also have no equity, these items include: a Maserati, an Escalade, a Ford 350, a Sea-Doo boat, a Kawasaki quad, and 2 go carts.
How could a couple live such a rich lifestyle when they knew they had nothing? The whole thing blows my mind. But more shocking is the creditors. Why did a bank loan this much money to a couple with such little equity? Why did new banks keep lending? The "new" banks must have known their line in the "secured credit" priority. They also must have seen their assets.
The article doesn't mention it, but I would assume that their bank fraud case has some effect on the bankruptcy case. If it does, I don't think the Giudices would be given a discharge for these debts. Could these creditors come after the Giudices for the rest of their lives?
Lastly, Professor Ayer told a story about a lawyer friend of his that "threatened" to take a debtor's dog in bankruptcy. I just wanted to note that in this case, the Giudices valued their dogs at $600. The trustee said the dogs were worthless. I suppose the question still remains, are dogs worth anything in bankruptcy?
http://www.tmz.com/2014/04/09/teresa-and-joe-giudice-bankruptcy-debt/
I too read an article related to them. The amount of debt they had was incredible, and what the creditors received - a joke. This article made me wonder though, when people file loans don't the creditors look at what other debts they have, and if they can actually afford to pay off the loans? At some point, I think we got to stop blaming the debtor and turn around and questions why are banks loaning so much money to people who simply appear to be able to pay it off. I assume that with five creditors, some would take note of that and deny the money? Or am I wrong? Where do creditors/banks draw the line as to what amount to let celebrities borrow? I believe, somehow, the banks are to blame for assuming that just because they are celebrities they would be able to pay them back. It seems incredible to me that while some people are getting denied small $30,000 dollar loans to start up a business, celebraties easily walk away with millions of dollars in loans to support their luxurious life styles.
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