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Aaron Carter, who achieved fame as a singer in the late 1990s and early 2000s, filed for Chapter 7 bankruptcy in Florida in October 2013. In his petition, he lists assets of just over $8,000 and debts of more than $2 million. More than half of the debts, including a seven-figure amount owed to the Internal Revenue Service, date back to when Carter, now twenty-five years old, was a minor. Much of his fame and fortune accrued before his eighteenth birthday, but he is liable for tax on that income regardless of age.

Carter’s music career began before he was even a teenager. His older brother, Nick Carter, was a member of the popular “boy band” the Backstreet Boys. Carter opened shows for the group and toured on his own. He acted in movies and on stage, and his family was featured on a reality television show several years ago. He is currently touring in support of a comeback, but the performances are reportedly not bringing in enough money to pay his debts.

The majority of his outstanding debts were incurred when he was a minor, and his relationships with the people managing his career did not always turn out well. He filed for legal emancipation from his mother, who was also his manager, in 2003, claiming that she was working him too hard and mismanaging his income. He was also managed by Lou Pearlman, who created and managed numerous “boy bands.” Pearlman is currently serving a sentence in federal prison for fraud, and has been the subject of multiple lawsuits by former clients, including two lawsuits filed by Carter in 2002 and 2007.

Carter claims a total of $8,232.16 in assets, and $2,204,654.00 in liabilities. He owns publishing rights to some of his songs, but says that he does not receive any royalties. His bankruptcy petition suggests that 2003 was a critical year in shaping his present financial troubles. The IRS reportedly has two tax liens against him: $1.3 million for 2003 taxes, and just over $60,000 for 2006. Carter was fifteen years old and still near the height of his career in 2003. Other debts include more than $31,000 owed to American Express for charges incurred from 2006 to 2009, and a settlement with Live Nation Merchandise for over $575,000.

Tax debt is treated by federal bankruptcy law as a priority debt, while credit cards and other debts are considered nonpriority. If the trustee can sell any assets, the proceeds would go towards paying the tax bills first. Bankruptcy courts are very limited in their ability to discharge tax debt, so it may be unlikely in Carter’s case. He is reportedly focusing on the bright side of this process, according to his publicist, viewing this as a way “to move forward.”

Bankruptcy attorney Devin Sawdayi has practiced in the Los Angeles area since 1997, helping countless people who find themselves without enough income to adequately service their debts. We represent clients in Chapter 7 and Chapter 13 bankruptcy cases, helping individuals create plans enabling them to pay debts on a manageable schedule, sell assets to pay off debts, and obtain a discharge of remaining debts at the conclusion of the bankruptcy process. Please contact us today online or at (310) 475-9399 to schedule a free and confidential consultation to discuss your case.

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Music Mogul’s Chapter 11 Bankruptcy Plan Causes Controversy, Los Angeles Bankruptcy Lawyer Blawg, July 5, 2013

Discharge of Federal Tax Debt in Bankruptcy, feat. Willie Nelson, Los Angeles Bankruptcy Lawyer Blawg, June 10, 2013

Celebrities in Los Angeles and Elsewhere Seek Bankruptcy Protection, Too, Los Angeles Bankruptcy Lawyer Blawg, June 7, 2013