If there’s one thing that business moguls, Hollywood celebrities, music artists and the regular folks have in common, it’s none other than the possibility of going bankrupt. Bankruptcy hits harder the million-dollar earning individuals who seemed to have it all one minute, then managed to lose everything the next.
Here, we will take a look at the top ten individuals who used to be living the good life but are now broke, and what the reasons are for being bankrupt in the first place. Being rich at some point in your life is useless if you don’t learn to save your money. Just ask these celebrities. Rich people only stay rich if they invest their money right and this should be a lesson for all of us! If you want to know which rich people who are now broke are, keep reading!
Bankruptcy: The Basics
First, let’s have a quick definition of the term bankrupt. By law, a person, business or organization goes bankrupt because of inability to pay debts. In other words, an individual who files for bankruptcy is legally declared insolvent, impoverished or destitute. Once bankruptcy is declared, it basically means that a person has reached that crucial point beyond the financial danger zone. Read more about these rich people who are now broke!
If you answered yes to all or most of these questions, there is a possibility that you are going bankrupt:
- Can you only make minimum payments on your humongous credit card bills?
- Do you frequently get calls from collections agencies?
- Do you feel that your finances have gotten way out of your control?
- Do you always exceed your budget and are having problems paying off all your monthly bills?
- Do you find yourself having to live on a paycheck-to-paycheck basis?
- Have you considered getting the services of a debt consolidation company?
- Have you reached that point when you are unsure about how much you actually owe all your creditors?
These rich people who are now broke could be a lesson for everyone. Assessing your overall financial situation is the best way to tip the scales before you actually reach the point of bankruptcy and that’s exactly what happened to some of these rich people. The earlier you look for suitable solutions to work your way out of your debts, the less likely you are to file for bankruptcy. But if you straightened things out at a point when it’s too late to do anything, you have no choice but to throw in the towel and file for bankruptcy. You can either voluntarily file for bankruptcy, or the creditors can ask the court to order you bankrupt.
Reasons for Going Bankrupt
Next, what are the reasons for going bankrupt? Take a quick look:
- Inadequate money management skills.
If you’re fresh out of college and you just secured your first job, you really should keep your budget as modest as possible – at least until you’re paying off your student loans and other debts. Those who stumble upon big amounts of cash instantaneously also usually lack proper management skills, thus leading to an accumulation of debts which may later on lead to bankruptcy. Apparently, these rich people who are now broke didn’t take that into consideration.
- Falling victim to materialism.
If you’re a woman who buys designer shoes and follows the latest trends in fashion, or if you’re a family who is guilty of keeping up with the Joneses, you could be falling victim to materialism. There’s nothing wrong with buying things for yourself but if it reaches a point when you are sacrificing the needs just to buy the wants, you could be in the road to bankruptcy. Another important aspect that our rich people who are now broke didn’t think of.
- Lack of investments.
Another reason for going bankrupt is not putting your money in good investments. Once you’re earning enough, it does pay to put part of your earnings into investments that will grow over the years.
- Not preparing for the future.
Most rich people who are now broke believe that wealth is for ever. Rich people in Hollywood are the guiltiest of this: not preparing for the future. Some who earn a few million dollars in a hit picture might think that the fame, glitz, glamor and money will not end – but it actually does. In fact, being a celebrity is one of the most inconsistent professions out there. If you fail to save while you are earning big money, you just might find it all gone in the blink of an eye.
Top 10 Rich People Who are Now Broke
Finally, here is our list of the top 10 people who went from the Ritz to the rubble as a result of filing for bankruptcy:
1. Anna Nicole Smith
Actress Anna Nicole Smith was famously married to 90-year-old J. Howards Marshall, an oil mogul. When her husband died, Smith was left without an inheritance despite the assumption that a trust fund was set up for her. She filed for bankruptcy in 1996 and unfortunately died herself before the case was settled at a US Supreme Court.The most controversial VIP on our list of rich people who are now broke died in misery.
2. Allen Iverson
NBA superstar Allen Iverson seemed to have it all, especially after being named the Rookie of the Year in 1996. From initially earning $154 million and gaining huge fame, it all went downhill when he had to file for bankruptcy in 2012. An overly luxurious lifestyle could also be the culprit behind Iverson’s financial problems because of his love for bling and a huge entourage.
3. Courtney Love
When Nirvana singer Kurt Cobain, Courtney Love’s husband, passed away in 1994, she discovered that she was neck-deep in debt. She lost her rented home and had to sell 25% of the famous band’s music catalogue in 2006. She filed for bankruptcy the same year. Is anybody shocked by the fact that rich people who are now broke rarely invested their money?
4. Donald Trump
Donald Trump filed for bankruptcy four times. The first was in 1991 then the next year; and again in 2004 and 2009. However, these are not personal but corporate bankruptcies. This is probably a unique case because despite the fact that he had to give up a mega yacht, stakes in a hotel and Trump Airlines, he still is worth $2.7 billion.
The best lesson to take away from Trump’s story is that your business and personal funds should be kept separately so that if one stumbles and you have to file for bankruptcy, your personal funds are still kept intact. Most rich people who are now broke don’t find ways to bounce back, but Donald did.
5. Gary Busey
American actor Gary Busey has more than 160 film credits but had to file for bankruptcy in 2012. He claimed that his $50,000 asset is not enough to offset his debts which are worth one million dollars.
6. Jack Whitaker
Jack Whitaker won the West Virginia state lottery in 2002. The amount? A staggering $314 million. Whitaker took out his lottery winnings as a one-time payment, which after taxes, amounted to $113 million. That still seems to be a lot of money but with his lifestyle of going to strip clubs, casinos and similar establishments, he eventually had to pay for the hard and fast lifestyle.
After going through a messy divorce and dealing with bouncing check issues, he had to file for bankruptcy and even had to pay for more than one and a half million dollars in gambling losses. Jack is now part of the rich people who are now broke club, it seems.
7. Michael Jackson
King of Pop Michael Jackson had to file for bankruptcy in 2007, when he was unable to pay back a $25 million for Neverland ranch. In the course of his career, Jackson sold more than 750 million records but still had to file for bankruptcy because he overextended his finances by living a literally grand lifestyle as a pop superstar, which turned out to be more than what he can actually afford.
Who knew rich people who are now broke could waste so much money on simple things?
8. Mike Tyson
Boxing superstar Mike Tyson earned over $400 million during his career but had to file for bankruptcy eventually. The reason? His luxurious lifestyle, a messy divorce and a large entourage. The athlete filed for bankruptcy in 2003, when he also claimed to have accumulated a total debt of $27 million.
9. Nadya Suleman
Also known as the Octomom, Nadya Suleman had to file for bankruptcy. In a television interview, she said that she had to do it for her kids because they all needed a fresh start. Suleman filed for bankruptcy in Los Angeles, where she claimed that she had less than $50,000 in assets and has anywhere between half to a million dollars in liabilities. Of all the rich people who are now broke, Nadya has the saddest story.
10. Toni Braxton
R&B singer Toni Braxton had to file for bankruptcy twice. When she was producing one hit song after another, the singer hit one financial hurdle after another. She accumulated around $50 million of debt. Her list of creditors includes Flamingo Las Vegas, Tiffany Jewelers, Orkin Pest Control, AT&T and Four Seasons Hotel.
Her first bankruptcy filing was in 1998 and because of health problems and a divorce, she again filed for bankruptcy in 2010. Toni bounced bank from our list of rich people who are now broke and made a fortune within the next few years.
So what can we take away from all of these bankruptcy stories? Even we do not live in an economically uncertain time, it still pays to manage your money properly. Ensuring your future by investing your money, especially if you’re a celebrity and your job is not that secure, is the best way to stay away from the possibility of having to file for bankruptcy.
In the end, it does pay to follow the maxim that you should live below or within your means, so that you would not have to deal with serious financial problems later on – such as dealing with mountains of debt and eventually having to file for bankruptcy. Generally, rich people like keeping their money together, not spending it away. If you want to be able to spend big tomorrow, invest wise today!