Rich, now broke: Bankrupt celebrities
To the average person, it can be hard to believe that broke celebrities exist or that bankrupt celebrities can be in the same category as regular folk like you and I. After all, many of these people are highly successful with their large salaries being splashed across newspapers. That’s the funny thing about money, it can slip right out of your hands even if you have a lot of it. Here is a list of bankrupt celebrities to show you that money mismanagement and unexpected events can happen to anyone!
50 Cent was once one of the most successful rappers of all time with a net wealth of $155 million. However, bad investments, an expensive lifestyle and a big lawsuit cost him most of his fortune. In 2015, the rapper filed for bankruptcy with a debt of $10-$50 million. It took 50 Cent nearly more than a year to come out of bankruptcy. Even so, he has over $23 million in debt, which he will pay back over the next 5 years. Even among bankrupt celebrities, these figures were shocking!
The President of the United States has always dealt with big financial projects, making and losing large amounts of money. While he has never declared financial bankruptcy, his companies have gone bankrupt numerous times. The first of these cases occurred in 1991, followed by several in 1992 and then again in 2004 and 2009.
Once an Oscar-winner, the actress who was married to Alec Baldwin found herself bankrupt in 1990. Poor financial decisions, like pulling out of an acting contract, forced her to pay penalties which depleted her bank account. Kim Basinger bankrupt, was forced to sell off her assets, including a town she had bought with investors.
With hit songs like ‘Sexual healing’, it’s surprising that Marvin Gaye has made to this list of bankrupt celebrities. However, it was his personal life that led to his financial problems. An expensive divorce from his first wife, Anna Gordy, resulted in unpaid alimony amounting to $600,000! If we’ve learnt anything from this it’s to choose your spouse carefully, very carefully!
Bankrupt celebrities aren’t limited to recent times. The famous writer Mark Twain is the earliest celebrity on this list to declare bankruptcy. Mark Twain made his fortune off his publications of ‘The Adventures of Huckleberry Finn’ and the memoirs of Former President Ulysses S. Grant. However, poor investments and other professional failures drained all of his profits. The serious financial panic of 1983 caused the market to dip and was the straw that broke the camel’s back. He declared bankruptcy when he was 60 years old.
Often mocked but widely renowned, Larry King is a famous talk-show host who made it to the list of bankrupt celebrities. His financial problems were before he became a talk-show host. Spurred by criminal charges and other financial problems, Larry Kind was over $300,000 in debt before he finally filed for bankruptcy in 1978. Thankfully, that was also the year that he began hosting ‘The Larry King Show’ on a Miami radio station. The money he made from the new job helped him reverse his dire financial status.
Her soulful vocals and empowering songs made Toni Braxton one of the most famous singers of the 1990’s. However, despite millions in album sales, she’s on our list of bankrupt celebrities, showing you that the unexpected can always occur. Although she was a star, Toni Braxton was never properly compensated for her efforts due to an unfair contract with her record company. Compulsive shopping to keep up a life of luxury derailed her financial situation even more. She filed for bankruptcy in 1998, only emerging when her hit song ‘Unbreak my heart’ shot to fame. However, when unexpected medical issues affected her income, she once again sank into bankruptcy. She finally emerged from her second brush with bankruptcy in 2013.
Taxes are no joke and you need to pay them! Aaron Carter, another one of our bankrupt celebrities, learnt that lesson the hard way. In 2013, the singer-actor filed for bankruptcy with over $2 million in debt! Most of this was due to taxes that he owed to the government. By the time he settled his financial issues, Aaron Carter only has a flat-screen TV, a Louis Vuitton bag and $917 in his bank account.
Mike Tyson bankrupt! Mike owed over $11 million to the government in taxes, nearly $8 million to his ex-wife, another $8 million in legal fees, thousands in mobile phone bills, $35 thousand for a birthday party, nearly $7,000 on care for his tigers and $50,000 for limos! That’s an impressive tally so it’s no wonder he’s on the list for bankrupt celebrities. Perhaps the most shocking expense on this list is not the $35 thousand-dollar birthday party, but the fact that this actor has tigers as pets! Talk about getting pet insurance for those big cats!
Although he’s one of our bankrupt celebrities, M.C. Hammer was once estimated to have a net worth of about $33 million! Can’t touch that! Unfortunately, his luxurious lifestyle and large staff put him in debt. He owed about $13 million when he filed for bankruptcy in 1996, of which a significant portion was also owed to the government in the form of taxes.
Top 10 reasons people go bankrupt
The cost of healthcare is only going to increase. People who don’t have healthcare insurance might find themselves unable to pay for treatment. However, in recent years, studies have also shown that those with insufficient health insurance were just as likely to suffer bankruptcy. Therefore, it’s important to get the proper healthcare coverage to protect you in the long term!
Loss of income
During periods of financial instability, companies tend to cut down on costs. For employees, this could mean lack of a bonus or pay cuts resulting in reduced income.
Like number 2, with pay cuts come layoffs. Job loss is one of the most crippling reasons for financial problems, especially for those living paycheck to paycheck.
Credit card debt
Most people think that credit card debt accumulates due to irresponsible spending. However, it is more likely that people pay for sudden expenses with their credit card. Many a time these expenses are large and can add up quickly. When they’re unable to pay off their bills, interest rates create a large amount of debt.
Getting a divorce is not just emotionally costly, it’s a financial issue. Let’s not even get started on lawyer’s fees. Whenever you get divorced, assets need to be split up and most couples suffer a loss of income. If one half of a couple has racked up debt, the debt could be split between both partners, especially if they are holders of a joint account.
Emergencies can occur at any time, that’s why they’re so devastating. Unfortunately, these emergencies can also deplete funds that have taken you years to accumulate overnight.
University education is expensive, even with all the government help! With such a large sum, even a low-interest rate can mean that you’re paying back thousands of dollars more than you initially borrowed.
Energy bills are constantly increasing. Heating, air conditioning, electricity, gas and water bills can add up very quickly. Defaulting on these payments not only harm your credit score, they incur a high-interest rate and heavy financial penalties.
If you take out a large loan with your home as collateral and then default on your repayments, the bank can legally seize your home as a foreclosure. People have declared bankruptcy to avoid losing their homes.
Luckily, inflation in Australia has held at around 4%-1.2% over the past 10 years. However, when inflation increases, people can lose a significant portion of their savings just through a reduced buying power. This means that they have to spend more to get the same things. Of course, overspending can also be due to poor money management or uncontrolled spending habits.
These reasons are why it is important to get your loan from a lender who will follow responsible lending practices. This means that they protect clients from financial ruin and bankruptcy by only lending them the amount that they will be able to repay.
Things you need to know about being bankrupt
Even broke celebrities need to go through these steps. Bankruptcy or insolvency is not something to be undertaken lightly. Perhaps through an unexpected series of events, you find yourself in financial trouble. Here are some tips and steps to take if you find yourself bankrupt. When your debt becomes unmanageable, don’t wait until you are living far below your normal quality of life. Bankruptcy can bring you relief from your creditors and repayments, but there are several consequences that you’ll need to be aware of before applying.
You must appoint a trustee
This is someone or a company you trust to manage your bankruptcy. They must be a registered trustee or an official trustee (AFSA) as they will work with you and your creditors to find a fair solution to your debt.
Bankruptcy may affect your income, employment and business
Because you’ll need to make compulsory payments if you earn above a certain limit, there may be restrictions regarding employment or running a business.
You aren’t free of all your debts
While you are free of unsecured debts, other debts aren’t covered by bankruptcy. These include court-imposed penalties, child support and maintenance, government student loans, debts incurred after bankruptcy is declared and unliquidated debts.
You won’t be able to leave the country
Your trustee will need to give you permission to travel overseas in writing.
You will be listed in the National Personal Insolvency Index
This is a searchable registry that lists legal insolvency or bankruptcy proceedings in Australia.
Your future credit may be affected
To apply for credit, over a certain amount, you will need to inform your loan provider of your bankruptcy for 5 years from the date of bankruptcy or 2 years from the end of bankruptcy, whichever is later.
Your assets may be sold off
Your trustee is an important figure because they have the legal right to sell your possessions.
Assets that you may keep include:
- ordinary household possessions like furniture and computers,
- a car that’s worth less than $7,700,
- trade tools worth up to $3,750,
- at most $1,000 for living expenses in your bank account, and
- superannuation, life insurance policies and personal injury compensation payments.
Assets you will probably have to sell include:
- properties including houses and land,
- cars worth more than $7,700,
- antique and luxury electronic items,
- trade tools worth more than $3,750,
- artworks of significant value and some jewellery,
- any inheritance, tax refunds or winnings, and
- money above the amount of $1,000 in your bank account.
Any legal action you might be involved in will be affected
If you’re involved in any legal proceedings apart from insolvency, you’ll need to inform your trustee and the courts to confirm if you can proceed.
Your bankruptcy period
Bankruptcy starts from the day that you get approved and lasts 3 years and 1 day from the day that you file your statement of affairs.
If you have read all of this and find that you still want to apply for bankruptcy, you can do so on the Australian Financial Security Authority website.
Tips to help you recover from bankruptcy
- Find out what caused your bankruptcy
- Identify your financial goals
- Check your credit score
- Slowly re-establish your credit by regularly paying off bills, including credit card bills.
- Avoid unfair deals
- Seek support from others in your position or who have been in your position
- Think positively