Long Island residents may remember Dionne Warwick’s’ voice as one of the most recognizable of the 1960s, in hits such as “Walk on By” and “Do You Know the Way to San Jose?” At 72, she still performs fairly regularly. But according to her publicist, gross financial mismanagement in the 1980s led her into long-term financial problems.
Last month, she filed for Chapter 7 bankruptcy protection, citing liabilities of well over $10 million, and assets of only $25,500.
She reported her monthly income as $20,950, while her monthly expenses came out to $20,940. That means she has only $10 left over at the end of each month.
A big part of the problem, according to news reports, is that Warwick fell behind on her taxes for a number of years. While her publicist said she has paid her delinquent tax bills, the resulting penalties have a gathered interest, leading to hundreds of thousands of dollars in debt. This, combined with other debts, put her on the hook for $10,727,429.91 in liabilities.
Chapter 7 is a powerful tool to get out of overwhelming debt quickly, but not everyone qualifies for it, and it is often not the best option for individuals. Generally, only those with relatively low disposable income may file for Chapter 7. Those with higher incomes who are burdened with heavy debt may qualify instead for Chapter 13.
The main difference between the two types of bankruptcy is that Chapter 13 allows filers to set up a repayment plan that will pay off all their debts within five years, but Chapter 7 wipes out many, but not all, types of debt within a few months. Perhaps the biggest drawback to this increased speed is that those who file for Chapter 7 must typically liquidate a large amount of their total assets.
Source: The Star-Ledger, “Singer Dionne Warwick declares bankruptcy citing $10M in back taxes,” Victoria St. Martin, March 26, 2013