Right-wing conspiracy theorist Alex Jones has temporarily protected himself against more than $1 billion in defamation judgments by filing for personal bankruptcy.
The Infowars founder is facing massive judgments in Texas and Connecticut, where juries found him financially liable for spreading falsehoods about the 2012 Sandy Hook Elementary School shooting that killed 20 children and six school staffers.
Free Speech Systems LLC, Jones’ business which produces his Infowars radio and video talk shows and sells products, filed for Chapter 11 in July.
With Jones filing separate bankruptcy cases for both his company and himself personally, families looking to collect on the judgments won’t see payouts any time soon. But it’s also unclear whether Jones can wipe out his debts using his Chapter 11 case.
Can Jones avoid his debts to victim families?
Generally, claims for willful and malicious injury—like defamation—aren’t dischargeable in bankruptcy. The bankruptcy court can decide whether a debt is dischargeable.
Whether the legal elements of “willful and malicious injury,” are met is an open question. The Texas and Connecticut judgments didn’t consider the merits of the families’ defamation claims. They were default decisions after judges determined that he failed to respond to discovery. Juries only weighed in on how much Jones and his company should owe.
Sandy Hook families could ask the judge overseeing Jones’ bankruptcy—Judge Christopher Lopez of the US Bankruptcy Court for the Southern District of Texas—to protect their judgments against any discharge.
Jones, on the other hand, could argue that a full trial is required to determine whether there truly was “willful and malicious injury.”
But if it’s found that Jones can’t discharge his debt, bankruptcy won’t offer relief from the staggering judgments against him.
Without bankruptcy relief or a settlement, Jones’ pursuers could spend the rest of their lives trying to collect against him.
How does bankruptcy benefit Jones?
Jones will be required to disclose all of his assets and business activities, under penalty of perjury. If those disclosures aren’t accurate or full, potential criminal penalties could follow.
But the bankruptcy filing gives him use of the powerful automatic stay, which halts creditors’ collection efforts. Jones can ask the bankruptcy court to pause the judgments while he moves forward on appeals. Jones is seeking either a new trial or to have the massive Connecticut verdict against him set aside.
Creditors—including the Sandy Hook victims’ families who are owed the judgments—will have to prove that Jones can’t use his bankruptcy to discharge what he owes them. Bankruptcy also gives Jones the advantage of being able to fight all his creditors in one forum with the goal of reaching a settlement, instead of the multiple courts he’s so far been sparring in.
Additionally, personal bankruptcy provides Jones a mechanism to be able to wipe out some of his liability without getting creditors and other stakeholders’ consent.
Jones on Friday said on his Infowars show that he’s out of money and that his bankruptcy will show as much.
How do Jones’ creditors benefit?
Jones personal finances are much more restricted in bankruptcy. He can’t move or get rid of assets beyond “ordinary course expenses” without court approval. And Sandy Hook victim families will likely get more insight into his personal finances than they would otherwise.
If Jones can form a reorganization plan, he’ll have to give Sandy Hook families at least as much as they would receive in a liquidation under Chapter 7.
But Jones likely has an uphill battle in trying to exit bankruptcy with a plan to pay off creditors because of the sheer amount of the debt and the history he has with his creditors.
The Sandy Hook victim families will likely continue working to enforce the jury’s verdict.
What’s going on with Infowars?
Free Speech Systems’ bankruptcy has run a turbulent course so far. In September, the company faced a major setback in its case after Lopez removed its top advisers for their failure to disclose prior connections to Jones.
Lopez—who will also oversee Jones’ case—also ordered a bankruptcy trustee to investigate the intra-family and other dealings in Free Speech’s case that could hurt creditor payout. Since then, Free Speech has picked up new advisers.
If the investigation turns up fraud, dishonesty, incompetence, or gross mismanagement, Jones could lose control over the assets, face a liquidation order, or dismissal of the bankruptcy case.
Meanwhile, Jones, and his various creditors have begun court-supervised mediation talks to possibly work out a settlement of the defamation judgments.
Jones’ shows remain on air. The Free Speech Systems case will continue as Jones embarks on his personal bankruptcy.
To Learn More:
—From Bloomberg Law
—From Bloomberg News
--With assistance from Laurel Brubaker Calkins.