Seven famous people who survived bankruptcy

As the economy continues to look grim, the word "bankruptcy" is on the tips of more and more tongues. While being unable to pay one's creditors is never a good situation for a company or an individual, it may not be the financial kiss of death that you might think. (Just ask Donald Trump, whose casinos have gone bankrupt twice.)

A number of successful people have found themselves overextended and ended up filing for bankruptcy, only to successfully stick it out and find firmer financial footing again.

Here are a few famous names who knew what it's like to be strapped for cash:

1. Abraham Lincoln

His face may now appear on the penny, but at one time, Lincoln didn't have a single cent to spare. Lincoln tried many occupations as a young man, including buying a general store in New Salem, Illinois, in 1832.

While he may have been terrific at splitting rails, winning debates, and wearing stovepipe hats, Honest Abe wasn't much of a shopkeeper. Lincoln and his partner started buying out other stores' inventories on credit, but their own sales were dismal.

As the store's debts mounted, Lincoln sold his share, but when his partner died, the future President became liable for $1,000 in back payments. Lincoln didn't have modern bankruptcy laws to protect him, so when his creditors took him to court, he lost his two remaining assets: a horse and some surveying gear. That wasn't enough to foot his bill, though, and Lincoln continued paying off his debts until well into the 1840s.

Lincoln's not alone in the annals of bankrupt commanders-in-chief, though. Ulysses S. Grant went bankrupt after leaving office when a partner in an investment-banking venture swindled him.

Thomas Jefferson filed for bankruptcy several times, including after leaving office, possibly because he threw around a lot of cash on food and wine.

William McKinley went bankrupt while serving as Ohio's governor in 1893; he was $130,000 in the red before eventually straightening out with the help of friends. He won the White House just three years later.

2. Henry Ford

Speculation abounds about the future of the Big Three motor companies, leading some observers to wonder what Henry Ford would think of this financial peril. Ford actually couldn't be too judgmental, though, because he was no stranger to debt himself.

In 1899 the young mechanic and engineer started the Detroit Automobile Company with the backing of three prominent politicians. Ford hadn't quite mastered the innovation and production techniques that would eventually make him rich, though. Over the next two years, Ford proved to be too much of a perfectionist, and his plant only produced 20 cars as he painstakingly tinkered with designs.

The enterprise went bankrupt in 1901 and reorganized into the Henry Ford Company later that year. Ford eventually left that group and finally got things right in 1903, when he founded the Ford Motor Company. Things didn't go so badly for the Henry Ford Company after he left, either; it changed its name into one you might find a bit more recognizable: the Cadillac Automobile Company.

Ford wasn't the only auto magnate who knew how bankruptcy felt, though. General Motors founder William Crapo Durant took a massive hit during the Great Depression that saw his fortune fall from $120 million to bankruptcy. He spent his last few years running a bowling alley in Flint, Michigan.

3. Walt Disney

His name may be a stalwart brand today, but early in his career, Disney was just a struggling filmmaker with too many bills. In 1922 he started his first film company with a partner in Kansas City, Kansas.

The two men bought a used camera and made short advertising films and cartoons under the studio name Laugh-O-Gram. Disney even signed a deal with a New York company to distribute the films he was producing. That arrangement didn't work out so well, though, as the distributor cheated Disney's studio.

Without the distributor's cash, Disney couldn't cover his overhead, and his studio went bankrupt in 1923. He then left Kansas City for Hollywood, and after a series of increasingly successful creations, Disney debuted a new character named Mickey Mouse in 1928.

4. Milton Hershey

Milton Hershey always knew he could make candy, but running a successful business seemed just out of his reach. Although he never had a formal education, Hershey spent four years apprenticing in a candy shop before striking out on his own in Philadelphia in 1876.

Six years later, his shop went under, as did a subsequent attempt to peddle sweets in New York City. Hershey then returned home to Lancaster, Pennsylvania, where he pioneered the use of fresh milk in caramel productions and founded the successful Lancaster Caramel Company.

In 1900 he sold the caramel company for $1 million so he could focus on perfecting a milk chocolate formula. Once he finally nailed the recipe down, he was too rich (and too flush with delicious chocolate) for anyone to remember the flops of his early candy ventures.

5. Burt Reynolds

Burt Reynolds was one of Hollywood's biggest stars of the 1970s. Unfortunately, though, he spent money like his career would never hit a downswing. He owned mansions on both coasts, a helicopter, and a lavish Florida ranch.

Gradually, his financial situation got grimmer as he made boneheaded career choices and weathered a pricey divorce from Loni Anderson. By 1996, the Bandit owed $10 million to his creditors, and the royalties from "Cop and a Half" just weren't flowing in quickly enough. Reynolds declared Chapter 11 bankruptcy, from which he emerged in 1998.

Not only did he not have to sell his trademark mustache at auction to pay his bills, Reynolds even got to keep his Florida estate, Valhalla. This homestead exemption raised the ire of some observers who didn't think hanging on to a $2.5 million mansion while writing off $8 million in debt was quite in the spirit of bankruptcy laws' provisions about keeping one's home.

In fact, when the Senate passed measures tightening these loopholes in 2001, Reynolds' keeping his ranch was one of the examples they used to decry bankruptcy proceedings as going too easy on the wealthy. "There is no greater bankruptcy abuse than this," said Wisconsin Senator Herb Kohl.

6. H.J. Heinz

When Heinz was just 25 years old, he and two partners began a company that made horseradish. As the legend goes, the spicy root was the first of Heinz's famed 57 varieties, but it wasn't as lucrative as he'd hoped. A business panic in 1875 bankrupted his enterprise, but Heinz's passion for condiments remained strong.

The very next year, Heinz got together with his brother and a cousin to start a new company in Pittsburgh, Pennsylvania. The reorganized group started making ketchup, and the business took off. Last year the H.J. Heinz Company had over $10 billion in revenue.

7. P.T. Barnum

Famous showman P.T. Barnum was always quick with a quip, but he wasn't so snappy about paying back his loans. Although he was successful showing off oddities in New York and around the globe, Barnum had a habit of borrowing cash from anyone who would open their wallet for him.

He'd use these funds to buy real estate, particularly around Bridgeport, Connecticut, where he was trying to foster industrial development. Unfortunately for Barnum, he went too far with borrowed cash, and in 1855, things bottomed out. Barnum was bankrupt and owed his creditors nearly half a million dollars.

Barnum didn't give up, though, and he slowly worked himself out of debt over the next five years. The showman gave lectures around England about showmanship and making money, and he regained control of his main attraction, The American Museum in New York City, in 1860.

In 1871, just a few months shy of his 61st birthday, Barnum entered the circus business with Barnum's Grand Traveling Museum, Menagerie, Caravan, and Circus, which raked in over $400,000 in its first year.


source: mentalfloss.com

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10 solutions to a personal credit crisis

The economy is in a financial crisis, but what about you? Here are some warning signs that you have a debt problem, and tips on how to get a handle on it.

NEW YORK (CNNMoney.com) -- Yes, the country is in a financial crisis, and the government has provided a $700 billion Band-Aid to help stop the bleeding. But what kind of first aid is there for your personal finances?

Financial experts offer these steps to help consumers climb out of personal debt and turn their financial picture around - even before the economy does. Here's how:

1. Look at the big picture. Experts agree that before fixing your finances, you must first take stock of your complete financial picture. Compile all of your bills and outstanding debts, including credit cards, mortgages, student loans, auto loans, personal loans and bank loans, and pinpoint exactly what you owe on each account and in total. List the creditor, monthly payment, outstanding balance, interest rate, due date and credit limit for each.

2. Pay important bills first. If you have to make choices about what to pay, prioritize the bills that are necessary to cover health, shelter, basic food and transportation to work or school, Bill Hardekopf, CEO of LowCards.com said.

3. Call your creditors. If you have missed payments, your creditor may be able to help you work out a payment plan, lower your rate, or lower your monthly payment, or even waive the late fee. Also try to negotiate lower rates. If you're paying the monthly minimums, then you're likely getting killed by interest. But some lenders may be willing to lower your rate if you explain your situation to them. Otherwise, shop around for a mortgage or credit card with a lower rate.

4. Transfer balances. If you have a high interest rate on one card and a running balance, consider transferring that balance to a card with a lower interest rate. Some cards still offer 0% for 12 months for balance transfers. That's a great opportunity to pay as much as you can over the monthly minimum and pay down your balance over 12 months. But keep in mind that most cards do charge a balance transfer fee of 3%, Hardekopf warned; so look for one that has a cap on the balance transfer fee. The amount you save on interest payments should more than offset the fee.

5. Quit the cards. If you feeling like you are drowning in credit card debt, stop using credit cards altogether. Often switching to cash or a debit card helps keep balances under control, save money on interest and has also been shown to decrease spending overall.

6. Prioritize paying down debt. Start with the credit card that has the highest interest rate. If they are all about the same then start with the credit card that is almost at its credit limit. Reducing your debt-to-credit ratio will improve your credit score. Experts suggest getting your credit card balance to less than 30% of your credit limit.

7. Bulk up your payments. Aim to pay more than the minimum amount for your loans, especially credit cards. The minimum payment might be a mere 2% of your balance, which makes paying off that debt almost impossible. For example, Hardekopf offered, if you have a credit card balance of $8,000 and your interest rate is 12%, making only minimum payments of 2% a month would take 346 months to pay off the balance and cost $7,696 in interest. If you pay 5% of your balance each month, it will take 109 months to pay off and will cost you $1,579 in interest.

8. Check your credit report for mistakes. For a free copy of your credit report, visit annualcreditreport.com or call 877-322-8228. It's not uncommon to find an old error that's dragging down your credit score. You can make a dispute by mail, telephone or online. If a corrected error results in a higher credit score, contact your creditors to make sure they know about it, and ask for a lower interest rate.

9. Get help. If paying down debt and cutting expenses doesn't seem feasible, contact a reputable debt counselor for help. The National Foundation of Credit Counseling (nfcc.org) is a good place to start. But look for someone that has a skill set that matches what you need, Eric Tyson, author of "Personal Finance for Dummies said. "If you're struggling with 'should I refinance my mortgage' a lot of financial advisers are not set up to answer questions like that."

10. Start saving. According to Greg McBride, senior financial analyst at Bankrate.com, the greatest barrier to saving is not the means but rather the discipline. Start putting a small amount aside in a high-yield bank money market deposit account or savings account. "Nothing you do financially will help you sleep better at night than knowing that you have money in the bank for a rainy day," McBride said.

Source: CNN Money

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