If Miss California Files Bankruptcy, What Kind of Bankruptcy Would She File?

Posted almost 6 years ago. 2 helpful votes



Donald Trump Fires Miss California. Like So Many Americans, She is Now Out of Work

The highly controversial Miss California, Carrie Prejean, just heard the words this afternoon that many middle-class Americans are hearing all too much these days: "You're Fired!" She got the boot from her Miss America Pageant boss, Donald Trump, who had practiced saying these most-feared words, "You're Fired," weekly on his The Apprentice TV show. Miss California achieved notoriety by answering a judge's question about gay marriage by saying marriage should be reserved for men and women. In any event, now she is without a job, and presumably without a paycheck (at least for the time being).


Let's Explore How the New Bankruptcy Laws Would Apply to Someone Like Miss California

Now that she's without a job, let's do the hypothetical: If she had to file for bankruptcy relief because of overwhelming debt, what kind of bankruptcy would she file? What bankruptcy chapter would it be? Chapter 7? Chapter 11? Chapter 13? Would she face any issues? Let's assume that she has gone through whatever money she had won, she has no job, and she has a significant amount of credit card debt. Let's also assume that she has a car, some jewelry, and some valuable and expensive designer clothes. Initially one would think that Chapter 7 bankruptcy is the appropriate way to go. Sure, she might have to turn over her jewelry; she might or might not be able to keep her car - depending on the amount of equity in it; and a trustee would probably not care about her clothes - even if they are designer duds. But she would be able to eliminate her debts.


If Miss California Files for Chapter 7 Bankruptcy, Would that be an Abuse of the Bankruptcy Laws?

However, not so fast. The U.S. Trustee might decide to look closer at the case for signs of "abuse." The U.S. Trustee reviews each and every bankruptcy filing for this. Knowing that Miss California is a celebrity very much in the news, the U.S. Trustee could argue that her Chapter 7 bankruptcy, where the objective is to discharge all debt, would be an abuse of the bankruptcy laws. They could argue that even though she may not have the ability to pay her debts now, her celebrity status and story could theoretically enable her to earn substantial amounts of money in the future. After all, she can make a million dollars or more selling her autobiography, licensing the rights to her life story, or giving speeches at $25,000 a pop. And Playboy or Penthouse would certainly pay her millions to pose topless, which she apparently has a fair amount of experience with.


It Could be Chapter 7, Chapter 11 or Chapter 13. . .

As such, the U.S. Trustee can argue that she has a great ability to earn substantial money in the future, even without the job of Miss California. They would then argue that if she wants to stay in bankruptcy, she would have to convert her case to one under Chapter 13, assuming her credit card debts are less than a $336,000, or even Chapter 11, if she cannot demonstrate a regular monthly income, which is a normal requirement for Chapter 13 cases. In Chapter 13, she would probably be called upon to pay back her creditors in full with a monthly payment plan, assuming that she was able to bring in sufficient income. If she couldn't bring in the necessary income to fund a plan right away, or if her debts exceeded $336,000, she would instead have to file for Chapter 11 relief. On the other hand, she could oppose the U.S. Trustee's position by arguing that she has no plans to milk her celebrity status, she has no plans to drop her top again, and that she will be in the poor house l

Additional Resources

For Similar Posts About Filing Bankruptcy, See the Bankruptcy Blog

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