Posted on Mar 26, 2013

UPI reported earlier today that famed singer Dionne Warwick filed for bankruptcy here in New Jersey on March 21.  Citing "negligent and gross financial mismanagement from the late 1980s through mid-1990s," she owes more than $10 million in unpaid taxes.  This, as against about $25,000 in assets (including 2 fur coats & 2 pair of diamond earrings worth a total of $13,000, and various gowns worth $5,000).  But a careful review of her bankruptcy petition raises a couple of interesting points.

Yes, You Can Discharge Taxes

First, the tax debt dates back to the 1990s, so she is claiming that, as a result, those obligations are dischargeable.  Although I wonder where the IRS and the State of California have been all these years, and what they have done to try to collect it, it does show that tax debt can be discharged in bankruptcy under the right circumstances.

But Can You Really Live That Lavishly?

Second, I can't help but question whether she has the ability to pay some of her debt.  Her statement of income (Schedule I) shows $20,950 net received per month ($3,750 for performances, $1k for royalties, $14k from her pension, and $2,200 in Social Security).  But her monthly living expenses on Schedule J tell another story.

Monthly living expenses must be those "reasonable and necessary for the support of the debtor or her dependents." She owns no real estate, but pays $5,000 per month for her home.  Other expenses include:

  • Home Maintenance (on a rental): $1,000
  • Housekeeping/Housesitting: $5,000
  • Personal Assistant: $4,000
  • Gardener (in addition to home maintenance costs): $300
  • Driver to NYC meetings & local venues (in addition to $1,000 in transportation expenses): $200

Her total expenses are $20,940, leaving her $10 per month in disposable income.

Can She Find Some Money to Pay Her Creditors?

Now I realize that she lives in North Jersey, and that some of these expenses are business related, but seriously?  She owes $10 million in taxes!  She can't get a cheaper rental to house her $1,500 in furnishings and $5,000 in art, and a less expensive cleaning service?  How about she rents a condo and fires the gardener?

In addition, perhaps she should retire.  All of her income is passive except for an average of $5,000 per month for performances.  Out of that, she pays $4,000 for her personal assistant!  This would also most likely lower other expenses, such as the housekeeper/sitter, transportation expenses, and driver.

I like Dionne Warwick, but I do not think, in light of her financial situation, that she should be able to maintain a lifestyle such as that at the expense of her creditors.  Her First Meeting of Creditors (where she will face her trustee) is on April 26th.  It will be interesting to see how this develops.

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Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.

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