By Ryan C. Wood
Yes, actress Teri Polo filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code, Bankruptcy Case No. 14-17165, in the Bankruptcy Court for the Central District of California. Unlike the rehashed mass of articles out there regarding her bankruptcy filing I have actually read her bankruptcy petition and understand the ramifications of filing a Chapter 11 reorganization of debts versus a liquidation bankruptcy case. The mass media just takes someone’s name, usually a celebrity, and says they filed for bankruptcy and provide very little significant facts about the bankruptcy case itself. That is not okay.
So for starters, Ms. Polo filed a Chapter 11 given that she does not qualify to reorganize her debts under Chapter 13 of the Bankruptcy Code. The total amount of her unsecured debts exceeds the debt limitation to file a Chapter 13 case and reorganize debts. She did not file a Chapter 7 liquidation case because? I do not have enough information regarding Ms. Polo or her finances to comment on this without getting me into trouble so . . . . . . . .
Teri Polo filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code
Yes, Ms. Polo has some financial difficulties. According to the schedules of assets, income and expenses filed by Ms. Polo’s bankruptcy lawyers, Ms. Polo owes a lot of taxes to both the Internal Revenue Service and the Franchise Tax Board that dates back as far as 2005. She just did not pay taxes for quite a few years. That is not the whole story, but a major part of the story. Her scheduled priority taxes owed to the IRS and FTB total $301,938.71. The priority taxes should/must be paid in the plan of reorganization. If the plan of reorganization is proposed for five years that translates to a monthly plan payment of about $5,100 per month to pay back the priority taxes owed. She also has taxes owed that are listed as unsecured nonpriority claims totaling $470,029.65. This amount does not all have to be paid back, but whether it is paid back is dependent upon her monthly disposable income. Ms. Polo’s future income and expense and other factors will determine if she pays all or some of the unsecured nonpriority taxes owed. She also owes about $29,000 to American Express and $30,000 resulting from a lawsuit she apparently lost. So now we know her debts. What about her income? Mr. Polo’s gross projected income is about $40,000 a month, and after payroll deductions her net income is about $21,687.00 a month. Her projected expenses are $18,011.00. Her monthly net disposable income is therefore $3,676.00. This is the amount each month she has to fund her Chapter 11 plan of reorganization. This could only be part of the story though. Once her bankruptcy attorneys file her disclosure statement and plan the picture will be completely clear.
In all fairness according to Ms. Polo’s filed schedules it appears that most of Ms. Polo’s income goes to normal living expenses, taking care of her two children and their education costs and paying a $3,500 a month child support payment. All of these are commendable expenses and reasonable expenses given her income. Her other living expenses appear to be reasonable considering she has a household of three people including herself.
In a reorganization case a plan is proposed and funded to pay debts usually either from future income or the sale of property. Ms. Polo does not have any property to sell so her plan of reorganization will most likely be funded by her future income and the $3,676.00 in disposable income mentioned previously. The significance of this is she may pay back all of the debts she owes. It is possible. It will just be under better terms or different terms. Ms. Polo has not filed a plan yet so this pure speculation. The point is that just because she filed for bankruptcy protection does not mean she will not pay back her debts.
