By Ryan C. Wood
Celebrity bankruptcy cases usually involve some sort of tax debt owed to the Internal Revenue Service. O.J. Simpson dream team attorney F. Lee Bailey’s, or Francis Lee Bailey, recently filed chapter 7 bankruptcy case is no different. I know there is a lot of water under the bridge that led up to Mr. Bailey choosing to file for chapter 7 bankruptcy protection and this article will not get into any of that. Choosing to file for bankruptcy protection is following the law to protect assets and discharge debts. When a person or company files for bankruptcy protection the qualitative issues are usually not as important as the quantitative issues. Most bankruptcy cases are all about the bankruptcy filer’s income, expenses, assets and debts at the time the bankruptcy case is filed. Also, some financial transactions that lead up the filing of the bankruptcy case are important also within certain time limitations. What I have found is the mass media rarely reports accurate information about celebrity bankruptcy cases. Below is a breakdown of the facts based upon Mr. Bailey’s chapter 7 bankruptcy petition filed in the United States Bankruptcy Court for the District of Maine, Portland Division, Bankruptcy Case No. 16-20375, filed on June 24, 2016.
First a Brief Description of Chapter 7 Bankruptcy
First let us get the ground rules right. Chapter 7 is commonly referred to by Bankruptcy Attorneys as the liquidation chapter under the Bankruptcy Code given that any assets of the bankruptcy filer that cannot be protected by exemptions are sold for the benefit of those who are owed money or creditors. Every state in the United States has different exemptions to protect the bankruptcy filers assets from those they owe money to. In California you can find the exemptions under CCP 703 and CCP 704. In Maine the state law code section is Me. Rev. Stat. Ann. Tit. 14, Section 4422. A chapter 7 liquidation bankruptcy can be either an asset case or a no asset case. The difference is exactly how it is described. An asset chapter 7 asset case has assets that cannot be exempted or protected that are sold by the chapter 7 trustee assigned to the case to administer the bankruptcy estate for the benefit of all parties involved, include the person or company that files for bankruptcy protection. In a no asset chapter 7 case all of the bankruptcy filers assets can be exempted or protected so those who are owed money get nothing. In a no asset case the bankruptcy filer receives a discharge of their debts and the case is then closed usually within 3 – 4 months from the date the chapter 7 petition was filed. Time will tell whether Mr. Bailey’s chapter 7 bankruptcy is an asset case or no asset case. A chapter 7 trustee has yet to be assigned to the case, the Section 341 Meeting of Creditors has not been held and no investigation into the financial transactions of Mr. Bailey leading up the filing has taken place. Chapter 7 trustees have a duty to administer bankruptcy as expeditiously as possible as to the best interest of all parties, not just those that are owed money.
F. Lee Bailey’s Chapter 7 Bankruptcy Case By The Numbers
So, what the chapter 7 bankruptcy voluntary petition provides Mr. Bailey has assets with a total a value of $408,176.26 and debts totaling $5,603,912.92. The assets include his primary residence in Maine and various miscellaneous personal property of no substantial value. After deducting the mortgage owed on his primary residence totaling $364,925.00, Mr. Bailey’s net assets are worth $34,375.00. Mr. Bailey’s debts are not complicated. The Internal Revenue Service has secured tax lien totaling $5,198,930.92. This tax debt was incurred between the years of 1993 – 2001. Mr. Bailey joined the O.J. Simpson “dream team” sometime before the initial preliminary hearing in O.J. Simpson’s criminal case. The rest of Mr. Bailey’s debt is his primary residence mortgage and loan from an individual who will not be named.
Francis Lee Bailey’s Income and Expenses
As of the date of Mr. Bailey’s chapter 7 voluntary petition his total monthly income is $7,119.00 with monthly expenses of $6,111.00. His income is from a number of sources. Mainly various retirement and pension income.
Maine Bankruptcy Exemptions Protecting F. Lee Bailey’s Assets
As part of the petition drafting Bankruptcy Attorneys apply exemptions to protect the bankruptcy filer’s assets. Maine state law exemptions to protect Mr. Bailey’s assets are found in Me. Rev. Stat. Ann. Tit. 14, Section 4422. Mr. Bailey is using the following exemptions to exempt or protect his assets from creditors: (1) Me. Rev. Stat. Ann. Tit. 14, Section 4422(1)(B) of $95,000 to protect equity in his primary residence; (2) Me. Rev. Stat. Ann. Tit. 14, Section 4422(2) of $5,000 to protect his vehicle; (3) Me. Rev. Stat. Ann. Tit. 14, Section 4422(3) to protect his household goods of inconsequential value; (4) Me. Rev. Stat. Ann. Tit. 14, Section 4422(3) to protect his miscellaneous electronics of inconsequential value; (5) Me. Rev. Stat. Ann. Tit. 14, Section 4422(3) to protect two pistols of inconsequential value; (6) Me. Rev. Stat. Ann. Tit. 14, Section 4422(3) to protect his clothing of inconsequential value; (7) Me. Rev. Stat. Ann. Tit. 14, Section 4422(4) totaling $750.00 to partially protect the claimed value of his jewelry worth $1,500; (8) Me. Rev. Stat. Ann. Tit. 14, Section 4422(15) of $400 to partially protect the money is his bank account at the time of filing of $533.26; (9) Me. Rev. Stat. Ann. Tit. 14, Section 4422(13)(E) protects his various pension income.
