Bankruptcies, divorces, affairs, and addictions — the public struggles of celebrities are constantly being broadcasted from tabloids and entertainment news outlets. Sometimes the public is shocked to hear about a celebrity misspending their fortune. Sometimes we like to speculate about what led them to a place in their life that they filed for bankruptcy. After all, it’s much nicer watching these tragedies than living them ourselves.
It is public knowledge that the bank accounts of big celebrities can boast some digits that we can’t even imagine. Sometimes celebrities catch a break and they shoot to complete financial luxury faster than they can even keep up. But as they say, easy come easy go. The most scandalous cases of celebrities losing it all are the ones where the bank accounts dry up even faster than they grew in the first place.
But before we take a look at the celebrities who spent away their millions, we want to address what bankruptcy really looks like. For the regular folks who may be struggling with student loans, credit repayments, paying the mortgage, and other financial difficulties, bankruptcy doesn’t look quite so glamorous as it does in the tabloids.
Bankruptcy can be a difficult and emotional process for individuals and their families. It is not to be taken lightly since it is an extreme method of debt relief. While it can be difficult to get back on your feet after a bankruptcy, it’s not impossible. The truth is that bankruptcy is really meant to give people a second chance at financial freedom. It’s a chance to start fresh and move past the feeling of being stuck in debt.
Understanding Bankruptcy
To put it simply, the idea of bankruptcy in Canada is as follows: the insolvent party (you) surrenders everything they own to a Licensed Insolvency Trustee, the only credit professional who is authorized to administer the government-regulated procedure. The bankruptcy trustee is then responsible for distributing a person’s assets in a way that allows the debtor to get the amount of debt relief that they need while treating their creditors equally and fairly.
While this sounds harsh, it’s important to remember that the goal is ultimate debt relief for the insolvent person. Bankruptcy was designed to help honest but down on their luck people who have fallen on hard times. The process, however, only deals with unsecured debts. What does that mean? Unsecured debts are things like personal loans, credit card debt, and income tax.
There are rules and regulations that are meant to allow a person to maintain a certain standard of living while carrying out the requirements and duties of their debt relief proceeding. Even though it can be difficult to release ownership of certain assets and to then build yourself up, bankruptcy helps many people get back on their feet and it might be what you need if you’re struggling with immense debt.
There Are Other Options
In order to qualify for a bankruptcy in Canada, a person must have lived or have done business in the country within the last year and they must be insolvent. To be insolvent a person has to owe at least $1,000 and be unable to meet their debts as they are due to be paid.
We mentioned how bankruptcy trustees are the only federally regulated professionals authorized to carry out the debt relief process. While bankruptcy is the most commonly known insolvency proceeding, many people are surprised to learn that there are other options. In some cases, an individual who is insolvent but meets certain criteria is better suited for another form of debt relief: a consumer proposal.
Consumer Proposal vs Filing Bankruptcy
Consumer proposals are a good option of debt relief for those who have a steady source of income and can commit to regular debt repayments. Even if they are working or earning money, it could be that their debts are collecting interest too quickly to keep up. When an individual faces the fact that they simply cannot pay back everything that they owe, then they are finally ready to take action against their debt.
Are you wondering about the difference between bankruptcy and consumer proposal and how the two processes could solve your debt difficulties? Some of the key differences between these methods of federally regulated debt relief come down to the amount of assets a person retains. Typically, an individual can retain more of their valuable assets in a consumer proposal than they would in a bankruptcy.
Another key difference is the type of deal the insolvent party strikes with their creditors. In a bankruptcy, the debtor assigns the responsibility of their assets over to the Licensed Insolvency Trustee who then distributes them among creditors according to what is fair. In a consumer proposal, the trustee negotiates with creditors to settle on a new sum of debt, less than the original debt, on the premise that a person cannot pay everything back. A new debt amount is settled upon and the debtor makes regular payments over a fixed period of time until they’ve paid what they owe.
In both a bankruptcy and a consumer proposal, the total amount of debt that a person must repay is reduced. When you’re getting ready to meet a bankruptcy trustee in Ontario you should prepare questions in advance and go into the meeting ready to get as full of a picture as possible.
Celebrity Bankruptcies
So, who are those bright and shiny stars who went through their own financial recovery? Take a look at the following list of celebrities. Some of them went through a formal bankruptcy while others avoided the procedure but still lost a lot of money.
1. Larry King
Everybody who knows anything about suspenders and coffee knows who Larry King is. The iconic broadcaster has been a staple of popular television and is currently estimated to have a net worth of nearly $150 million. But King wasn’t always on top, in fact, he suffered a serious financial and professional loss back in the 70s.
In 1972, before King was known for doing what he does today, one of his business partners accused him of fraud. King was arrested and charged with grand larceny but the charges were eventually dropped. Still, the damage on his reputation was already done and he was fired from his jobs in radio and unable to find work anywhere else. Later in 1978, King finally declared bankruptcy.
2. Marvin Gaye
Today we know Marvin Gaye as a legend behind some of the biggest hits of the 60s, 70s, and 80s. He’s the one responsible for songs like “I Heard It Through the Grapevine” and the very famous “Let’s Get It On.”
The singer filed for bankruptcy in 1976, however, when his divorce from Anna Gordy Gaye required him to pay her the royalties from his next album, which he cheekily called “Here, My Dear.” The royalties, which ultimately amounted to approximately $600,000, were meant to serve as a substitute for unpaid alimony to Gordy.
3. Christopher Biggins
He’s another TV personality who went through a bankruptcy, though in the case of Biggins, it was a voluntary bankruptcy. In a period of time where he was not receiving work opportunities, the star continued to spend money as if he did.
Going through bankruptcy ended up being the perfect thing, however, since it meant that Biggins could clear his debt in just a little over a year. From the horse’s mouth, the bankruptcy was “the best thing that ever happened to me.” Biggins credits the bankruptcy for introducing discipline and financial organization into his life.
4. MC Hammer
There was a time where no one really could touch MC Hammer and his immense star power. The parachute pants aficionado made a name for himself in the 90s as a star rapper with the song, “Can’t Touch This.”
His career is reported to have earned him over $33m, but Hammer had to ultimately file for bankruptcy when he spent everything away on a lavish lifestyle. Hammer had a paid entourage of 40 people, he owned at least 17 cars, and he was also a racehorse owner with a whole stable of them. He filed for bankruptcy in 1996 with more than $13m in debt.
5. Mike Tyson
With a big personality and a career filled with controversy and drama, the name Mike Tyson is sure to ring a bell. He was the former world heavyweight boxing champion and would have earned hundreds of millions of dollars as a boxer, but he spent it all on the “finer things” in life.
According to the New York Times, Tyson spent away his fortune on mansions, cars, limousines, parties, clothes, and motorcycles. One of Tyson’s most extravagant purchases was a $173,706 diamond-lined gold chain, but it’s not quite right to call it a “purchase.” Tyson never actually paid for the piece, and it was eventually included in the $23m of debts outlined in the bankruptcy petitions he filed.
6. Burt Reynolds
He’s the man with the iconic moustache who was known for his roles in “All Dogs Go to Heaven” and “Smokey and the Bandit.” The actor filed for bankruptcy in 1996 and it was a public affair. According to Reynolds’ publicist, the actor was trying to work and negotiate a plan with his creditors to “meet his obligation, maximize his business opportunities and continue his illustrious career in the entertainment industry.
The actor was not required to liquidate his assets and he continued to pay alimony and child support to his son and ex-wife. According to Reynolds, his divorce cost him $40m and he had a former accountant steal $15m from him.
7. Cyndi Lauper
Before Lauper really took off as a solo singer, she was struggling to make ends and playing in a band called Blue Angel, which then split up. After the band broke up, Lauper filed for bankruptcy and spent some time singing at a Japanese restaurant dressed as a geisha for money.
Eventually, her manager pulled through and got her a deal with a new record company and in 1983 Lauper got her first record deal as a solo artist. There was a catch, however, since Lauper had to go bankrupt first. Years later in a 2013 interview, Lauper described how at the end of the legal proceedings, the judge very aptly took the gavel and said: “let the canary sing.”
8. Oscar Wilde
We’ll have to go back a little bit in time to the late 1800s to discuss this literary icon’s past, but it’s definitely one filled with scandal and juicy details. The famous writer and poet Oscar Wilde had to declare bankruptcy in 1885 after suing the Marquess of Queensberry for libel.
When Queensberry was found not guilty, Wilde was ordered to pay the legal fees of the defence. Wilde then went bankrupt and many of his possessions were sold off, including the production right to the hugely popular “The Importance of Being Ernest” as well as “Lady Windermere’s Fan.”
9. Willie Nelson
Willie Nelson is known all over the world for his smooth country-folk music and his laid-back looks. Recently, Nelson’s net worth was estimated at over $25 million, however, the musician had had some nasty experiences related to his taxes. Nelson famously received one of the highest tax bills in history (this was during the 80s) after he invested in an illegal tax shelter.
This was seen as a major financial infraction and was met with a $16.7m bill from the Internal Revenue Service, but luckily his lawyers managed to negotiate that down to $6m. Even though he could have done something, Nelson ignored the issue and failed to take any action. As a result, the IRS seized all of his possessions except for a guitar — how fitting.
Get Help with Your Finances
Reading about celebrities who gained and lost big, big sums of money might not really resonate with those who aren’t mega rock stars or champion athletes. Still, if you have a constant feeling that your debt just isn’t going to get resolved, and you owe more money than your income can accommodate, then it’s time to consult with a financial professional.
Contact a David Sklar location near you to book a consultation with an empathetic and knowledgeable credit professional. Our Licensed Insolvency Trustees (formerly known as bankruptcy trustees) are skilled in navigating the intricacies of federally regulated debt relief and they understand how difficult and trying your position must feel. If you’re ready to get the help that you need to start your journey towards financial freedom, then get in touch for more info and we’ll be there to help.
