bankruptcy | Hearthstone Legal Group

BANKRUPTCY LAW: The Curious Case of Alex Jones & InfoWars

by Herbert Wiggins | Jun 10, 2022 | bankruptcy, BANKRUPTCY LAW, creditors

Bankruptcy is a legal proceeding that liquidates (eliminates) the unsecured debts of the debtor (debts not backed by collateral). It is important to note, however, that the debtor may have a particular legal status, and that legal status is what determines which bankruptcy is used, or which entity is able to cancel its debt.

For example, if a corporation files for bankruptcy, and is properly formed and documented, then it may file for bankruptcy without the necessity of its owners also filing for bankruptcy. And the corporation’s unsecured debts may be eliminated or re-structured, depending on the particular type of relief applied for.

However, if both the corporation and the individual are equally liable on the debt, such as through a personal guarantee by the owner, then the filing of a bankruptcy petition for the corporation will not insulate the individual. The individual would also need to separately file for bankruptcy protection, if that is the type of relief sought.

The case of Alex Jones is a illustrative. Mr. Jones, through his media outlet, InfoWars, has become infamous for making the false claim that the mass shooting at the Sandy Hook Elementary School was some type of staged or phony incident. Several parents of children killed at Sandy Hook Elementary sued Mr. Jones and InfoWars for defamation, on the theory that by maintaining such a claim, Mr. Jones apparently implied that the grieving parents were lying about the deaths of their children.

For whatever reason, Mr. Jones did not contest the lawsuit, choosing instead to allow the court to take a default against him. Such an action, however, did not prevent the court from continuing its proceedings against Mr. Jones and his company or companies.

The court would eventually enter judgments for large sums of money in favor of the parents, both against Mr. Jones, and against some or all of his companies, including Infowars.

See, for example, cases collected by the First Amendment Watch at NYU: https://firstamendmentwatch.org/deep-dive/alex-jones-infowars-and-the-sandy-hook-defamation-suits/

Mr. Jones responded to being hit with these large judgments by filing a bankruptcy petition for Infowars. Bankruptcy of course means that no further action collection against the debtor’s personal unsecured debts, unless the debts (in Jones’s case, the judgments) relates to fraud, moral turpitude, or is otherwise considered non-dischargeable.

Setting aside the question of whether the judgments for defamation are connected to moral turpitude, where these false statements relate to the deaths of the plaintiff’s children, there appears to be a disconnect between the judgments and the bankruptcy filing by Mr. Jones. He declared bankruptcy for Infowars, but apparently not for himself personally. The judgments were against him personally, as well as against Infowars and other entities. In other words, if there is a judgment against Infowars, bankruptcy might have the effect of making the judgment uncollectible against Infowars, but the judgment against Jones himself would be unaffected.

A bankruptcy petition for Infowars is not the same as a bankruptcy for Alex Jones, because the individual and the company are separate, assuming that the company is created in a proper, recognized corporate form, such as a Corporation, LLC, or other distinct legal entity.

Mr. Jones cannot protect himself personally by filing a bankruptcy for Infowars. He would have to file bankruptcy for himself as well. It may be that he did not want to file bankruptcy for himself, and believed that somehow corporate bankruptcy would protect his personal fortune.This is not the case.

Thus, when an individual and corporation are both fully liable on the debt, corporate bankruptcy will not protect the individual. This occurs, for example, where an individual personally guarantees the debt of a company, or the corporation and the individual are jointly liable.

So apparently here in the case of Infowars, Infowars can be pursued for the Judgment, but in the absence of Infowars, Mr. Jones may also be pursued, unless he files for personal bankruptcy, and the bankruptcy court accepts the filing as appropriate, and not involving moral turpitude, or affected by some other disqualifying factor.

THIS POST DOES NOT CONSTITUTE LEGAL ADVICE, AND READING IT DOES NOT CREATE AN ATTORNEY CLIENT RELATIONSHIP. PLEASE CONSULT DIRECTLY WITH AN ATTORNEY FOR ANY LEGAL ADVICE!!

This image was originally posted to Flickr by Tyler Merbler at https://flickr.com/photos/37527185@N05/9072625782 (archive). It was reviewed on 5 November 2017 by FlickreviewR 2 and was confirmed to be licensed under the terms of the cc-by-2.0.

Jurisdiction And Precedential Effect

by Herbert Wiggins | May 20, 2022 | bankruptcy, BANKRUPTCY LAW

JURISDICTION AND PRECEDENTIAL EFFECT: The bankruptcy courts, and Bankruptcy Appellate Panel, are Article I Courts under the US Constitution. The district courts and courts of appeal are Article III courts. As such, the Courts of Appeal are not bound by the decisions of the bankruptcy appellate panel, but considers such decisions as advisory only. In fact, district courts and courts of appeal routinely perform a de novo analysis (considering the facts and law anew) of the Bankruptcy Appellate Panel’s findings. In re Silverman 616 F.3rd 1001 (9th Circuit 2010).

Automatic Stay: Bank Freeze

by Herbert Wiggins | May 13, 2022 | automatic stay, bankruptcy, BANKRUPTCY LAW, creditors

AUTOMATIC STAY: The Bank froze the debtor’s accounts after the filing of the bankruptcy, and notified the trustee and the debtor. The bank did not use the funds as a set off for any debt. This is sometimes referred to as an administrative hold upon the debtor’s account. The court held that this action, all by itself, did not constitute a violation of the automatic stay; the bank requested information from the trustee, after making the trustee aware of the freeze on the account. The trustee did not respond. The actions of the bank constituted no violation of law. Mwangi v. Wells Fargo Bank 764 F.3d 1168 (CA9, 2014)

Automatic Stay: Corporate Debtor Sued

by Herbert Wiggins | May 6, 2022 | automatic stay, bankruptcy, BANKRUPTCY LAW

AUTOMATIC STAY: Corporate debtor was sued in class-action in New Mexico state court, prior to filing bankruptcy. As part of his bankruptcy, the corporate debtor asked to remove the class action to Bankruptcy Court. This removal was not barred by the automatic stay, which would have been an absurd result that could prevent even the filing of a Proof of Claim. In re Cashco, Inc. 598 B.R. 9 (2019), citing to, among others, In re North County Village 135 B.R. 641 (1992), and In re Miller, 397 F.3d 726 (2005).

Bankruptcy Law: Procedure for Reopening

by Herbert Wiggins | Apr 8, 2022 | bankruptcy, BANKRUPTCY LAW, tax return

BANKRUPTCY LAW (9th Circuit Bankruptcy Appellate Panel; Procedure for Reopening): Where debtor sought to reopen bankruptcy case on behalf of his LLC, bankruptcy court properly denied this relief. The debtor sought to reopen matters that would not affect the disposition of the debt; he had failed to timely appeal the fees of the trustee and the filing of a tax return; and he could file an amended tax return outside of the bankruptcy process. A case should not be reopened where “reopening the case would be a ‘pointless exercise.’“ (In re Caldel Holdings, LLC, Bankruptcy Appellate Panel Case No. NC-21-1083-BFS, filed October 27, 2021 [unpublished].

Bankruptcy Law: Homestead Exemption filed December 22, 2021

by Herbert Wiggins | Apr 1, 2022 | bankruptcy, BANKRUPTCY LAW, Homestead Exemption, Property Lease, Real Estate

BANKRUPTCY LAW (9th Circuit Bankruptcy Appellate Panel; Homestead Exemption): Where debtors did not live in the property continuously from the time the judgment liens attached until the date of the filing of the bankruptcy petition, and where the facts showed that debtors had leased the property and were apparently living in another location on a permanent basis, homestead exemption was properly denied. Creditors could file claims and go through the bankruptcy process to attempt to collect appropriate portions of the debt. In re Jaswinder Singh Bhangoo, [published opinion] 9th Circuit Bankruptcy Appellate Panel, No. BAP No. EC-21-1158-BSL, filed December 22, 2021.