FAMOUS PEOPLE AND BANKRUPTCY

People facing financial difficulties often feel like they are the only ones having money troubles. They often feel embarrassed and isolated from the rest of the community. They are reluctant of file for bankruptcy because they are afraid they will be considered failures and irresponsible by the public. They do not realize that many people, including famous celebrities, have faced similar financial difficulties and filed for bankruptcy to discharge their debts. This article will discuss some of these famous people including artists, athletes, authors, actors and businessmen who filed for bankruptcy.

Rembrandt Haremenszoon Van Rijn, 1606-1669, the famous Dutch painter, accumulated more debts than he could repay and filed for bankruptcy at the age of 50 in 1656. Jacob Peter Thomasz, a lawyer, supervised the sale of his assets in 1657 and 1658. Many of Rembrandt’s paintings and his house were sold at an auction. After the bankruptcy, he continued to paint but was not allowed to sell his works directly to customers. He was able to circumvent this law by having his son take over his business and sell his paintings.

P. T. Barnum, 1810-1891, the greatest American showman, filed for bankruptcy in 1871 due to losses he incurred in unwise business ventures. After bankruptcy he organized his famous circus, “The Greatest Show On Earth.” In 1881 he merged his circus with his most successful competitor, James A. Bailey, under the name of Barnum and Bailey Circus.

Mark Twain, (Samuel Langhorne Clemens), 1835-1910, pre-eminent American author, lost most of his money investing in a worthless machine called the Paige Compositor, an automatic typesetting machine. He filed for bankruptcy in 1894 and discharged all his debts, but was determined to repay the debts. He knew he could earn money by giving lectures to large audiences, so he traveled to Europe and spent the next four years lecturing in every major city. He used the proceeds from these lectures to repay all his debts. He also wrote several of his more famous books after filing bankruptcy including Pudd’nhead Wilson and Following the Equator.

Mathew Brady, 1823-1896, distinguished Civil War photographer, filed for bankruptcy in 1872 in Washington, D.C. when, after the Civil War, people lost interest in his work and he became unable to pay his business debts. Three years after he filed for bankruptcy the United Stated War Department agreed to purchase part of his photography collection for $25,000.00. He then reopened his gallery and was successful in attracting new clients for his work.

Henry John Heinz, 1844-1919, condiment manufacturer, started his company in 1869 selling horseradish, pickles, sauerkraut and vinegar. In 1875 the company filed for bankruptcy due to an unexpected bumper harvest which the company could not keep up with and could not meet its payroll obligations. He immediately started a new company and introduced a new condiment, tomato ketchup to the market. This company was, and continues to be, very prosperous.

Oscar Wilde, 1854-1900, acclaimed poet and author, was forced into bankruptcy in 1895. He had earlier been convicted of homosexual activity, which in England was illegal at that time, and was sentenced to two years in prison at hard labor. He was declared a bankrupt on November 12, 1895 and his property was auctioned off. After being released from prison he published his poem, The Ballad of Reading Gaol. His health was affected by his prison experience and he died at the age of 46.

Milton Snavely Hershey, 1857-1945, founder of Hershey’s chocolate, started four candy companies that failed and filed bankruptcy before starting what is now Hershey’s Foods Corporation. Mr. Hershey had only a 4th grade education, but was certain he could make a good product that the public would want to purchase. His fifth attempt was clearly successful.

Henry Ford, 1863-1947, automobile manufacturer, first two automobile manufacturing companies failed. The first company filed for bankruptcy and the second ended because of a disagreement with his business partner. In June 1903, at the age of 40, he created a third company, the Ford Motor Company with a cash investment of $28,000.00. By July of 1903 the bank balance had dwindled to $223.65, but then Ford sold its first car, and as they say the rest is history.

Mickey Rooney, 1920- , movie actor, blames alcohol and gambling for the financial problems he suffered in the early 1960′s. He owed the Internal Revenue Service $1.75 million and filed for bankruptcy in 1962. After the bankruptcy he continued to act and has had many roles in movies and television. He is still preforming live shows today.

Debbie Reynolds, 1932- , movie actress, purchased a hotel in Las Vegas in 1992 and called it the Debbie Reynolds Hotel and Casino. She thought she could operate the hotel successfully, however, it was plagued by a weak cash flow almost from the start. In July 1997 the hotel filed for Chapter 11 bankruptcy and Ms. Reynolds filed for personal bankruptcy. The hotel was sold at auction in 1998 to the World Wrestling Federation.

Johnny Unitas, 1933- , legendary Hall of Fame football quarterback, was a great athlete but a terrible businessman. Each of his business ventures, including bowling alleys, land deals and restaurants, was unsuccessful. He filed for Chapter 11 bankruptcy in 1991. Other football players who filed for bankruptcy include Tony Martin and Lawrence Taylor.

Jerry Lee Lewis, 1935- , famous Rock n’ Roll star, filed for bankruptcy in 1988 because of huge tax debts. The IRS seized his cars, furniture, baby grand piano and even showed up at his concerts to collect ticket sales. He has since recovered from bankruptcy and still gives live concerts.

Burt Reynolds, 1936- , movie actor, filed for bankruptcy in 1996 in Florida after his much publicized divorce from Loni Anderson. He had more than $10 million in debt. His dinner theater was foreclosed on by the mortgage lender and his ranch was sold. Since his bankruptcy he has continued to act in movies and was awarded the Golden Globe for Best Supporting Actor in the film Boogie Nights.

Sherman Hemsley, 1938- , TV actor who played George Jefferson in All in the Family, filed for Chapter 13 bankruptcy in June of 1999. He did not have sufficient funds to repay a $1 million loan from a Las Vegas investment corporation and pay taxes he owed to the IRS. He later dismissed the case and worked out his debt outside court.

Marjorie Margolies Mezvinsky, 1942- , former member U.S. House of Representatives from 1993 to 1995, filed for Chapter 7 bankruptcy in February 2000. She was denied a discharge however because she failed to satisfactorily explain and disclose what happened to all her assets.

Wayne Newton, 1942- , Las Vegas entertainer, filed for Chapter 11 bankruptcy in 1992 listing more than $20 million in debt. A few years later he signed a new contract with Stardust Hotel which pays him reportedly over $25 million per year for performing at the hotel 40 weeks a year for 10 years.

Kim Basinger, 1953- , actress, earned so much money from her movies that she was able to purchase the town of Braselton, Georgia. After the purchase she was sued for breach of contract for pulling out of the movie, Boxing Helena. She was not able to pay the damages resulting from the suit and filed for bankruptcy in 1993. As part of her bankruptcy she sold the town. She later married Alec Baldwin, had a child and won an Oscar for her role in the movie L.A. Confidential.

MC Hammer, (Stanley Burrell) 1962- , musician and entertainer, filed for Chapter 11 bankruptcy in 1996 because he did not have the income to support his lavish lifestyle and defend all the lawsuits that were filed against him.

HOW CELEBRITIES GO BANKRUPT

What do Burt Reynolds and Thomas Jefferson have in common? How about Kim Basinger and Gary Coleman? What about MC Hammer and… well I think that name tells you where this is going. They are all famous filers of bankruptcy and members of a long line of celebrity debtors. We look forward to their tales of woe on the last five minutes of the eleven o’clock news. We marvel at the details of each financial fiasco. One can’t help but wonder how could such fortune turn into such debt?

If you ask Kim Basinger, she might tell you it was her weakness for the town of Braselton, Georgia. Basinger bought the town for $20 million around the time she dropped out of the movie Boxing Helena. While this might have been a wise career decision, the financial fallout was severe. After being sued for breach of contract, Basinger filed for bankruptcy and had to sell the town.

Mike Tyson might point his finger at his pet tigers. They were among the boxer’s many outrageous purchases and accounted for over $8,000 of his debt. Of course, these innocent, caged beasts represented only a fraction of Tyson’s lifestyle which demands $400,000 a month to maintain.

For Debbie Reynolds, bankruptcy stemmed from her hotel. The opening of the Las Vegas property, named none other than the Debbie Reynolds Hotel and Casino, made the perfect home for her extraordinary collection of movie memorabilia. However, her finances fell into bankruptcy when the casino flopped and Cleopatra’s Headdress retired to storage.

Famous spending sprees are also to blame. Michael Jackson has been reported at various times to be in financial crisis. He’s also famous for outrageous spending. He purchased ten artificial intelligence Sony AIBO dog robots at $5,000 each, and it takes over $200,000 a month just to maintain and run his home. The King of Pop dazzled the American populace when he shopped away $6 million within a matter of hours on the TV documentary “Living with Michael Jackson.”

Robots, tigers and towns, oh my! While there are differences in the details, there does seem to be a common thread with these celebrity bankruptcies.

In a recent New York Times article, former comedian and director of the film Phat Beach explained the typical Hollywood financial story. “When you make money in this town it’s very fast, and it feels like it’s never going to end,” said Mr. Ellin. “I’ve done it myself. I’ve been the idiot who was spending money and then thought, ‘Wow, I haven’t had a job in two years.’”

Parents try to raise fiscally responsible kids by repeating clichés like “money doesn’t grow on trees.” Apparently, it doesn’t even grow on the trees behind the houses on MTV’s Cribs. Show business is a winner-takes-all career. When celebrity hits and the paychecks roll in, they don’t come with sound financial advice attached. Many of those who do strike it rich are suddenly so deep in wealth they don’t consider reaching the horizon.

Evan Bell is a business manager who represents a number of Hollywood newcomers. He recently told the New York Times, “When the agent says, ‘No one read that bad review’ and that ‘it doesn’t matter,’” his job is to be the voice of reason. “I say, ‘You got a bad review — don’t buy that new car.’”

Athletes aren’t immune to delusions of eternal wealth either. Derek Sanderson, a former football star, is one of the most famous for this misconception. In 1972, he signed a contract for a record breaking $2.65 million and lost it all to alcoholism and a string of bad investments. Back on his financial feet, he now advises athletes who find themselves in this daunting position of wealth.

“Almost every player is not conscious of the fact that it will end,” Sanderson says. Of his work as a business manager at Boston’s State Street Research he says, “We educate the players as to what risk is. Once you show the player how quickly the money can go, they get a good sense of calming down.”

Being a financial tamer sounds easier than it actually is. One Hollywood financial advisor, Scott Feinstein, told the New York Times about a call he received from a client in his mid-twenties who wanted to buy a $35,000 watch. “I said ‘What time does it say?’ and he said, ‘Ten minutes after 3.’” Feinstein recalled. “I told him, ‘Mine says 10 after 3 too, and it cost me 60 bucks. Put the watch down.’”

Of course, one $35,000 watch does not pave the road to bankruptcy. The problem occurs when exorbitant spending goes from isolated incidents to a must-have lifestyle. Apparently, when MC Hammer sang “Can’t Touch This,” he was not singing about his money. The famed rapper’s forty-member entourage outspent his $33 million income on lavish day-to-day living.

Though some of these anecdotes may ring familiar, you probably don’t think of any of these celebrities as actually suffering financially or sleeping out on the streets. Burt Reynolds, despite his $8 million in debt, kept a house that was valued at over $2 million. Kim Basinger certainly never looked like she was having any financial difficulty.

Filing Chapter 7 bankruptcy was a way for these debtors to wipe the slate clean and basically avoid paying their bills. The number of filers increased dramatically over the course of the nineties. For this reason, bankruptcy laws were challenged in 2001, and a new bill was put into place. Such a bill had faced contention in legislation due to the demographics of most bankruptcy filers. “This is a class issue, these are poor people we are talking about,” said Senator Paul Wellstone, Democrat of Minnesota in a call for compassionate conservatism.

But other Democrats charged that passing the bill was a form of payback to corporate America. They thwarted cases, such as those of Kim Basinger and Toni Braxton, which seemingly took unfair advantage of the law as it stood.

CNN Congressional Correspondent Kate Snow reported on changes to the federal bankruptcy code. She claimed the most significant aspect of the new bankruptcy legislation would be that filers would be subject to a “means test.”

“Anyone making over a certain amount of income would be forced to file under Chapter 13 rather than under Chapter 7 bankruptcy.” said Snow. “This means that they would have to pay off some or all of their debt – they would not be able to wipe the slate clean.”

So, is it working? Well, perhaps the fact that Tyson filed for chapter 11 due to his earning potential is evidence of justice for the average debtor. The fighter is planning a comeback, however. Not many others could so confidently boast of such a possibility with $40 million dollars in bills looming overhead. Perhaps recent changes to the law will make it more of an uphill battle for Tyson than it was for famed financial fumblers of the past.