How in the Hell Does Alex Jones Get to Spend $78,000 per Month in Bankruptcy?
Alex Jones filed for bankruptcy on Friday, Dec. 2, 2022, after juries awarded Sandy Hook parents almost $1.5 billion.
Let’s be clear. Alex Jones is a terrible person who has almost certainly filed bankruptcy in an attempt to avoid paying his creditors anything, specifically the Sandy Hook families, which have secured a 1.5 billion dollar judgment against him. Individuals who end up in Chapter 11 are there because they have more debt. Typically those individuals spend more, sometimes a lot more, than the average American. So, what does Alex Jones get to spend every month and who exactly decides?
Alex Jones filed Chapter 11 Bankruptcy in the Southern District of Texas, (22-33553) on December 2, 2022. Pursuant to Rule 2015.3 of the Federal Rules of Bankruptcy Procedure, Jones is required to file monthly operating reports. Monthly operating reports are necessary for the Court to monitor the operations and financial status of the Debtor, and include details on cash flow, income, household expenses, and other financial information. According to Jones’ monthly operating report for the month of June, Jones spent $76,113 on living expenses. In July, he had a minor increase in his spending and reported $78,000 for the month. This monthly spending was publicly viewed as excessive and drew media attention as well as the attention of the Sandy Hook families and the Creditor Committee in his Bankruptcy case, the latter of which filed a Reservation of Rights (“ROR”) on August 29, 2023.
In the Committee’s ROR, they consider Jones’ spending as “dramatic waste of value and disregard for the interests of creditors.” They point to the operating reports as a demonstration of Jones’s unwillingness to curb his spending and scale back his extravagant lifestyle. The Committee has attempted to get Jones to cut back on certain expenses and use discretion in his overall spending. After 6 months of requests, Jones sent the Committee a budget that according to them, proposed “an annual expenditure of more than $700,000 a year to support a lavish lifestyle.” Ironically, as the Committee pointed out, Jones’s operating reports actually exceed his already excessive budget. The Committee believes Jones’s wages are property of the bankruptcy estate pursuant to Bankruptcy Code section 541 and must be used to preserve the estate to maximize creditor recovery.
Bankruptcy laws typically allow debtors to claim reasonable and necessary expenses, with regards to disposable income. However, there are no rules that dictate an exact amount for monthly expenses in an individual Chapter 11 bankruptcy case in the same manner as Chapter 7 or Chapter 13. The rules on expenses are broad and vague which allows for different interpretations, thus creating scenarios like Jones’s. In his June operating report, Jones listed school and kids’ activities as $12,995 and childcare at a staggering $16,255 for the month. While these amounts are excessive for the average American, Jones argues this is the amount of care his children require based on his income and lifestyle, as such making this a reasonable and necessary expense. In July, Jones spent $13,186 on housekeeping and maintenance, $7,989 on childcare, and $15,184 in a monthly prenuptial payment to his ex-wife Erica. He also spent $6,338 on meals and entertainment, and an additional $3,388 on groceries.
Justifying personal expenses in an individual chapter 11 relies on several factors: reasonableness, disclosure, negotiation, professional input and court approval, and isn’t explicitly codified. Jones believes his expenses are reasonable, he has publicly disclosed them in his bankruptcy case, and he relies on a financial advisor, BlackBriar Advisors LLC, to assist him with his financial matters.
On September 18, 2023, Alex Jones filed an objection/response to the Committee’s ROR, where he argued as a chapter 11 debtor, he isn’t bound to a chapter 7 means test or disposable income budget, nor does he have a cash collateral budget to adhere to (his cash is not “collateral” for a loan, allowing a lender to dictate his budget or force him to get court approval for it). Jones believes because he has celebrity status as a talk show host, he can only bring in the income he needs to pay the estate by hiring people to assist with his personal, household, and childcare needs.
If the Committee wishes to force Jones to adhere to a stricter budget or reduce and/or eliminate expenses, they will have to either file a preliminary injunction to enjoin waste of estate assets, file a motion for the appointment of a trustee, or file a motion for dismissal or conversion of the Chapter 11 Case, all of which the Committee threatened in the ROR. The determination of what is deemed reasonable, necessary, and appropriate with regards to Jones’s expenses will ultimately be decided by the court. The court will have to evaluate the monthly expenses against the debtor’s income and likely take into consideration the 1.5-billion-dollar judgments against the estate filed by the families of the Sandy Hook victims.
While the Committee hasn’t filed an official objection, an objection to the next monthly operating report, or a request for relief, is likely. We would guess the parties are negotiating over this issue behind the scenes hoping to avoid going to court. If the Committee attempts to curtail his spending and loses the fight, Jones may feel emboldened enough to spend more. If the Committee wins, Jones will have to cut his spending. If the Committee loses, it gives up its leverage over Jones’ personal spending.
While this is a case dealing with a celebrity, every individual chapter 11 filer confronts these issues. Can the kids stay in private school? What expenses and activities can continue with the case in court? Is hiring a nanny acceptable? There are never easy answers.
Wenokur Riordan Seattle Bankruptcy Attorneys
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