One of the worst things about having money problems is the feeling people with these problems have that they are alone and isolated - that no one else has these problems. It is easy, if you are in a situation where debt problems have overwhelmed you, to feel as though you are the only person facing these problems. Nothing could be further from the truth. The truth is that many famous people have filed for bankruptcy protection. Some well-known people filed bankruptcy before they became well-known; some filed at the height of their fame. It’s good to know that even people who seem to have everything have money problems. And it’s very good to know why a well-known person filed bankruptcy case - that can help explain the circumstances in which bankruptcy can help individuals with financial problems. Let’s take a look at some familiar names who have filed a bankruptcy case, and why.
The legendary Motown, Marvin Gaye, recording artist filed for bankruptcy protection in 1976, at a time when he was a well-known and popular singer. Gaye found it necessary to file following a divorce judgment that required him to pay $600,000 in alimony payments to his ex-wife. Gaye simply did not have the ability to pay the large maintenance award in a lump sum. So he filed a bankruptcy case to clear out other debt he owed to give him the financial flexibility to honor the alimony obligation.
Marvin Gaye ended up filing a bankruptcy case after going through a divorce, a fact situation that is extremely common. When couples divorce, they go from living in one household, with two incomes to support the family budget, to living in two households with one income per household to support the family budget. It is perfectly understandable when the financial reality of divorce hits that some divorced people have to use bankruptcy protection to allow them to pay their child support and/or alimony obligations in a timely manner. Divorce led Marvin Gaye to the necessity of filing a bankruptcy case; that can happen to other people going through a separation and divorce, also.
The film maker who produced and directed the Godfather movies, Francis Ford Coppola, filed for bankruptcy protection in 1992 - and when he filed in 1992 it was the second time he had filed a bankruptcy case. The main reason for the 1992 bankruptcy case was the financial loss Coppola suffered from making the movie “One From the Heart,” which cost $27 million to make, but only made $4 million at the box office.
Francis Ford Coppola
Coppola extended himself financially to make “One From the Heart,” a situation that is present, on a smaller scale with individuals who own and operate small businesses. Small business owners will often borrow money to fund the acquisition of new equipment, machinery or inventory, or to hire additional employees with the belief that these new purchases will enhance the profitability of the business.
Small business owners are often risk takers, like Coppola. And like Coppola, sometimes the risks bring losses, not rewards. Our economic system is structured to encourage entrepreneurship. If a bankruptcy law didn’t offer small business people financial protection, there would be very few people financially capable of starting and building a new business. So the bankruptcy law exists, in part, to protect small business people from financial ruin if they become over-extended financially. Francis Ford Coppola used bankruptcy to protect himself financially after business losses - so can small business people.
Fans of the Boston Red Sox will always remember Schilling’s heroic pitching performance throughout the 2004 playoffs and World Series, which brought Boston its first World Championship in 86 years. As a star pitcher, Curt Schilling was extremely highly-paid. Yet he, too, was forced to file bankruptcy in 2012 when his post-baseball-career video game business suffered significant setbacks.
Like Francis Ford Coppola, Schilling filed bankruptcy due to business losses. But unlike Coppola, there were complications in Schilling’s bankruptcy, due to the claim made by the state of Rhode Island that Schilling and his partners in the video game business had defrauded the state in obtaining loan guarantees. However, Schilling and his partners were able to make a financial settlement with the state by paying a fraction of the amount the business had borrowed.
The lesson of Schilling’s case for the small businessperson is that while some financial transactions can raise issues with creditors in a bankruptcy case, the benefits of filing a bankruptcy case, even if there is the suggestion that some of the business-related debt was procured by fraud, can outweigh the risks associated with a filing. While it cost Schilling money to settle with the state of Rhode Island, the amount spent to settle was a fraction of the total debt owed.
The venerable talk show host, and long-time Brooklyn Dodger fan filed a bankruptcy case in 1978, before he was well known. Larry King filed for bankruptcy protection because of a Florida business deal that broke down in 1972. At that time, King was charged with stealing money from a former business partner. That case was resolved without a criminal conviction, but King’s reputation was damaged, and he found it extremely difficult to obtain employment, which ultimately led to the 1978 bankruptcy filing.
Like Larry King, the individual who becomes unexpectedly unemployed, or the individual who faces protracted unemployment often finds him- or herself in a position where filing for bankruptcy protection is necessary to preserve assets and protect income, once the person becomes employed again. Filing a bankruptcy case can be very useful for individuals who have been unemployed long-term. Bankruptcy protection allows these people to work for themselves, and their families, when they start working again - rather than working for their creditors.
The lesson we can take away from the example of Marvin Gaye, Francis Ford Coppola, Curt Schilling and Larry King is that even successful and famous people sometimes have to file bankruptcy cases. An expensive divorce, business setbacks and protracted unemployment can catch anyone unaware and put them in a position where a bankruptcy case is the only sensible alternative to maintain financial stability.
And it’s also good to realize that for all of these people, their life after they filed bankruptcy stabilized and they were able to continue their careers with dignity. If you have financial problems and are worried that you are all alone, remember these individuals - filing a bankruptcy case isn’t the end of your life - it’s a necessary step to reclaiming your life!