Rudy Giuliani Files for Bankruptcy After $148 Million Damages Order

Rudy Giuliani, the former New York mayor, has filed for bankruptcy following a judge’s order to pay $148 million in damages to two former Georgia election workers. This move may provide Giuliani with some time to address his debts, but it does not eliminate the jury’s award.

What does a personal bankruptcy filing do?

A personal bankruptcy filing, similar to a corporate bankruptcy, typically puts a hold on ongoing litigation and attempts by creditors to collect debts. It is not surprising that Giuliani filed for bankruptcy the day after a federal judge instructed him to start making payments on the damages owed to the former election workers. However, filing for bankruptcy can negatively impact an individual’s credit rating, making it challenging to obtain loans or purchase property in the future.

What is the benefit of filing for bankruptcy?

Individuals file for bankruptcy when their debts surpass their assets, and they see little hope of improving their financial situation. Bankruptcy provides individuals with breathing room to organize their affairs and develop a plan to repay creditors. The goal is to offer a debtor a fresh start, freeing them from long-term liabilities. In Giuliani’s case, his assets were valued between $1 million and $10 million, while his debts amounted to nearly $153 million.

Who are creditors in a personal bankruptcy?

Creditors are individuals, institutions, or businesses to whom an individual owes money. In a bankruptcy filing, creditors’ claims are typically ranked based on priority for payment. Secured creditors, such as banks holding mortgages on properties, usually have the highest priority. Other claims are considered unsecured, with some having priority status, such as tax debts. Giuliani listed approximately $1 million in income taxes owed to the Internal Revenue Service and New York State. Most of an individual’s debts in bankruptcy are classified as unsecured claims without priority status. Giuliani’s filing included the $148 million jury award and debts of around $3 million owed to lawyers as non-priority unsecured claims.

What happens to a person’s debts in bankruptcy?

In some cases, a payment plan is formulated in which an individual makes reduced payments to certain creditors. Creditors included in the plan typically receive only a portion of what they are owed. Some debts can be discharged in bankruptcy, meaning the individual is not obligated to make payments on them. These often include credit card debt, medical debt, and loans not secured by property.

However, certain debts cannot be discharged in bankruptcy, such as child support, student loan payments, criminal penalties, and income taxes. While some civil judgments can be partially discharged, judgments involving acts of malice may not be discharged. It is uncertain whether the jury award in favor of the former election workers will fall into this category for Giuliani.

According to Lindsey Simon, a professor at Emory University’s School of Law specializing in bankruptcy, it is unlikely that Giuliani will be able to discharge the jury award. However, the bankruptcy filing could provide him with time to negotiate a settlement.