Bankruptcy is generally considered the last resort for consumers who irresponsibly maxed out their credit cards or who were forced to file because of a catastrophic injury for which medical insurance was unavailable or failed to provide full coverage. For those bankruptcies that are in the news, they typically concern the Chapter 11 filings of major corporations like American Airlines, Pacific Gas & Electric and Enron.
But numerous celebrities, who often earn millions of dollars over their career or even in a single year, have had to file for bankruptcy protection for various reasons including incredibly poor business judgment. A list of 7 shocking celebrity bankruptcies may help bring these stars back to earth for the rest of us:
- Willie Nelson. Although a country singer, Willie Nelson was embraced by music lovers of all genres for his style, charisma and outlaw image, personified by his flowing long hair and public marijuana use. Mr. Nelson made millions from his music but tried to hide or park much of his income in tax shelters that the IRS declared illegal. After the IRS seized $16 million in assets, Nelson declared bankruptcy in 1990 to preserve what remained. He did hold a number of concerts to help pay off his remaining tax debts, which he was able to do by 1993.
- Burt Reynolds. Perhaps overextended by the mortgages on his various properties or from no longer realizing the millions he once was able to command, Burt Reynolds was nearly $10 million in debt when he declared Chapter 11 bankruptcy in 1996. Reynolds had several properties, all of which he eventually lost except for his Florida residence that he was allowed to retain under bankruptcy law. Reynolds claimed his financial woes came about because an accountant swindled him out of $15 million along with his losing two endorsement deals and having a well-regarded TV sitcom terminated. Reynold also lost money in a Florida restaurant chain. He continues to experience financial difficulties with some sources stating that he continues to owe millions to various people.
- MC Hammer. A famous rapper from the 1990s, MC had an entourage and staff estimated at 200 to whom he paid salaries totaling $500,000 per month. Such luxury is short-lived as Hammer came to realize. When he filed for Chapter 7 in 1996, he had debts of over $13 million and assets of $9.6 million. He is now a pastor in California but still produces the occasional music video.
- Mike Tyson. Athletes who grew up poor are notorious for spending their millions quickly and irresponsibly with no regard for making safe investments or managing it conservatively. Mike Tyson was regarded as the most fearsome boxer of his time and at one time was thought to have nearly $400 million in assets. Tyson spent recklessly on cars, mansions, jewelry, wild animals and anything that caught his fancy until the money ran dry, forcing him to file for bankruptcy in 2004. He owed more than $23 million, including $17 million in taxes to the US and British governments.
- Debbie Reynolds. A famous and beloved movie star, Ms. Reynolds’ Hollywood Motion Picture and Television Museum filed for Chapter 11 bankruptcy in 2010. In 1997, Ms. Reynolds had taken a huge financial loss after her Las Vegas casino and hotel went under, forcing her into bankruptcy at that time. Ms. Reynolds had accumulated a vast collection for her museum over the years but was forced to sell off many of her items including Marilyn Monroe’s dress that she wore in a famous subway scene in “The Seven Year Itch “for $4 million along with other Hollywood memorabilia.
- Toni Braxton. The singer has filed twice for bankruptcy, once in 1998 and again in 2010, claiming between $10 million and $50 million in debt from poor business decisions and a fixation on expensive home décor. She claimed her earlier bankruptcy stemmed from her constantly having to reimburse her record companies for clothes, travel, studio time, music videos and other costs so that she was forever in debt. Ms. Braxton also lost the copyright to 27 of her hit songs and was unable to buy them back when they were put up for auction.
- Larry King. Before he was known for his radio and TV interviews, Larry King was a radio announcer in the 1960s for a small Florida station. He has admitted to spending way beyond his means at that time and was arrested in 1971 for grand larceny for allegedly stealing $5000 from his business partner, charges that were later dropped. Unable to find gainful employment for a number of years, King declared bankruptcy in 1978 with debts totaling $350,000. Within months of his firing, he was offered a job at Washington D.C. station as a late night host that eventually led him to stardom.
You may not be a celebrity in anyone’s mind but these stories of celebrities who spent as if money was an endless resource or who had extremely bad luck can be a reminder to live within your means and to seek professional financial assistance if finances begin to spin out of control. A bankruptcy lawyer can also give you sound advice on what steps you can take out of the debtor wilderness and if bankruptcy is an option to consider given your own unique circumstances.