According to an article in the Chronicle, Michael Jackson died with over $400 million in debt, despite his superstar status, platinum albums and the millions of dollars he earned each year. According to the article he was only paying $4.5 million a year (as of 2006) to service his debt, but it wasn’t nearly enough.
The article said:
“The New York Times reported in 2006 that the previous year Jackson was making monthly payments of about $4.5 million on $270 million in debt. “That works out to an annual interest rate of about 20 percent, a toll more familiar in the worlds of credit cards, subprime lending and loan sharks and not commonly encountered by wealthy people with substantial assets,” the Times reported.”
For years, it seemed as if Michael Jackson was teetering on the edge of bankruptcy; but he never took the leap. Sound familiar? Instead, he died buried in debt leaving a pile of IOUs for his loved ones to sort out. If Michael Jackson had filed bankruptcy it may have been possible for him to discharge much of his debt and get on a reasonable bankruptcy repayment plan to repay those debts that could not be discharged.
Bankruptcy gives a second chance to everyone, including megastars. But most of us, megastars included, avoid bankruptcy because of embarrassment, shame and pride. Bankruptcy is a powerful tool that could have offered so much protection to Michael Jackson, his assets and his heirs even if he had died while the bankruptcy case was still open.
When a debtor dies during a bankruptcy case, the bankruptcy case continues without the debtor and a judgment is made based on the available information. It is very possible that if Michael Jackson had filed bankruptcy and then died during the case, he would have still received a bankruptcy discharge for some of his debts.
That would have at least freed his heirs from repaying those particular debts in probate court. But as it stands, Michael Jackson’s creditors will have the right to aggressively pursue his assets and demand repayment of debts from the liquidation of those assets. And it is very possible that once Michael Jackson’s creditors are paid there may be very little left for his children and other loved ones left behind.