BANKRUPTCY LAW: The Curious Case of Alex Jones & InfoWars

BANKRUPTCY LAW: The Curious Case of Alex Jones & InfoWars

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 by FlickreviewR 2 and was confirmed to be licensed under the terms of the cc-by-2.0.

Jurisdiction And Precedential Effect

Jurisdiction And Precedential Effect

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

Automatic Stay: Bank Freeze

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

Automatic Stay: Corporate Debtor Sued

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).

HOMESTEAD EXEMPTION: California Increases Protection

HOMESTEAD EXEMPTION: California Increases Protection

As of January 2021, California’s Homestead Exemption increases from a minimum of $300,000, to a maximum of $600,000. This means that many more homeowners in liquidation, Chapter 7 bankruptcy proceedings can keep their homes.
The California Civil Code will be amended as follows:
Sec. 704.730. (a) The amount of the homestead exemption is the greater of the following:
(1) The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000).
(2) Three hundred thousand dollars ($300,000).
(b) The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.
The statute does not say whether this will apply in bankruptcy as the “automatic homestead,” or whether the debtor must file a Declaration of Homestead. Based thereon, the debtor should strongly consider filing the Declaration with the County Recorder.

Pin It on Pinterest

Call Now ButtonCall Now