Famous Bankruptcies

							Famous Bankruptcies
                                     P.T. Barnum
                                     P.T. Barnum is known world-wide as the co-founder of the “Barnum & Bailey
                                     Circus.” But he wasn’t always so successful. In 1855, before starting his circus, he
                                     had to file for bankruptcy after a series of real estate investments failed and he
                                     owed creditors nearly half a million dollars.

                                     But he didn’t give up. He made it through bankruptcy, and slowly rebuilt his
                                     business over the next five years. In 1860 he was able to get back his main
                                     attraction, The American Museum in New York City. In 1871, at the age of 60, he
                                     started his famous circus. The rest is history.

                                     Walt Disney
Walt Disney is known for Mickey Mouse and the park which bears his name, Disneyland. What is less widely known
is that in 1921 he started a company in Kansas City called the Laugh-O-Gram. But the business failed, and had to file
for bankruptcy in 1923.

He also made it through the bankruptcy process, and after moving to Hollywood he started over with a new animation
company. The result was the the most successful animation company in history.

                                     Ulysses S. Grant
                                     After leading the Union army to victory in the Civil War, and after serving as the
                                     18th President of the Unites States, Ulysses S. Grant became a partner in an
                                     investment banking partnership with Ferdinand Ward. The firm ultimately failed,
                                     and forced a bankruptcy filing. It was so bad that Grant was forced to repay a
                                     $150,000 loan to one of his creditors by surrendering his Civil War mementos. On
                                     top of this, he was soon diagnosed with throat cancer.

                                     But despite all of this, Grant pressed on. He wrote a series of memoirs of his time
                                     in the Civil War which not only restored his family’s financial security, but has
                                     been praised as one of the greatest autobiographies in American Literature.

                                     Milton Hershey
                                     If you like chocolate, then you now this name. But what is not well known is that it
                                     took Hershey four different attempts to make it work. He established his first
                                     candy factory in 1876 in Philadelphia, which after six years of work, finally failed.
                                     Undaunted, he tried again in New York, and failed again. He faced several other
                                     failures and bankruptcies as well.

                                     But he kept at it. He eventually founded Hershey’s Foods Corporation in 1903 in
                                     Pennsylvania. His success with that chocolate company is truly an example of
                                     what a fresh start can do for anyone.

Larry King
Larry King is known for his vast number of skilled and friendly radio and television interviews. But his rise to fame was
not an easy one. In the 1960s he suffered a series of financial setbacks. In the 1970s a business partner accused him
of stealing money, and he was arrested, but it was later dropped. But the events took a heavy toll, and he could not
get regular broadcasting work for more than four years. He had to file for bankruptcy in 1978.

                               But in the same year, he was offered a show with the Mutual Broadcasting Network. It
                               was a late-night show and did not seem to be the greatest opportunity. But he made it a
                               big one. The new show was called The Larry King Show.

                               Abraham Lincoln
                               Most are unaware that the 16th President of the United States started his business
                               career running a grocery store. In 1832, at age 22, Lincoln and a partner opened a
                               small general store in New Salem, Illinois. But his partner died in 1833, and unable to
                               keep the store going, Lincoln was forced to file for bankruptcy in 1833.

                              Bankruptcy in the 19th century required that some debts be repaid, and Lincoln spent
                              the next 17 years paying back friends and family who lent him the money to start the
                              store. And when he later became a lawyer, he counseled people through the
bankruptcy process in his practice in Springfield, Illinois.
                           Rembrandt
                           One of the greatest painters of all time, Rembrandt was declared bankrupt by his creditors
                           in 1656. Bankruptcy in Holland of the 17th Century I a good example of how much better
                           our system really is.

                           Rembrandt’s house and art collections were auctioned, and when the proceeds were not
                           enough to cover the debts, his creditors still came after him. He spent the last few years of
                           his life in seclusion to avoid creditors and legal action. Despite this heart-breaking failure of
                           the legal process, Rembrandt went on to paint some of his greatest works including the The
                           Staalmeesters in 1662, and paintings of Alexander the Great and Homer in 1663.

                           Donald Trump
                           This billionaire real estate developer has been through bankruptcy multiple times. In 1991
                           his casinos were forced into bankruptcy as a result of the high interest rates he was paying
                           on construction loans. In 1992 the Trump Plaza Hotel was forced into a bankruptcy filing.
                           And he faced another failure in 2005 when the Trump Hotels also went through bankruptcy.

                           But despite all of these failure, he never stopped pushing forward. Even after multiple
                           bankruptcies, no one would describe him as a failure.

                           Mark Twain
                           Mark Twain is perhaps the most famous American writer. But even he faced bankruptcy in
                           1894 after a series of losses on investments and the failure of his publishing house which
                           enjoyed initial success selling the memoirs of Ulysses S. Grant.

                           Twain was the true image of persistence. Despite bankruptcy and business failures, he
                           launched a around-the-world lecture tour in 1894. The success of this tour allowed him to
                           pay off his creditors in full, although he was no longer under any legal obligation to do so.

                           And if you think credit is bad now, here is what he had to say about it:
                           "Beautiful credit! The foundation of modern society. Who shall say that this is not the
                           golden age of mutual trust, of unlimited reliance upon human promises? That is a peculiar
                           condition of society which enables a whole nation to instantly recognize point and meaning
                           in the familiar newspaper anecdote, which puts into the mouth of a distinguished speculator
                           in lands and mines this remark: "I wasn't worth a cent two years ago, and now I owe two
                           million dollars."


Chapter 7 and Chapter 13 – The basics.

What is Bankruptcy?
Bankruptcy is a process in which consumers and businesses can eliminate or repay some or all of their debts under
the protection of the federal bankruptcy court. For the most part, bankruptcies can be divided into two types --
liquidation and reorganization.

Chapter 7 bankruptcy comes under the liquidation category. It's called liquidation because the bankruptcy trustee may
take and sell ("liquidate") some of your property to pay back some of your debt. However, you may keep property that
is protected (also called "exempt") under state law. There are several types of reorganization bankruptcies, but
Chapter 13 is the most common type for consumers. In Chapter 13 bankruptcy, you keep all of your property, but
must make monthly payments over three to five years to repay all or some of your debt.
Both Chapter 7 and Chapter 13 bankruptcy have many rules -- and exceptions to those rules -- regarding which debts
are covered, who can file, and what property you can and cannot keep.

Chapter 7 Bankruptcy
Chapter 7 bankruptcy can be filed by individuals (called a "consumer" Chapter 7 bankruptcy) or businesses (called a
"business" Chapter 7 bankruptcy). A Chapter 7 bankruptcy typically lasts three to six months.
Property liquidation. In Chapter 7 bankruptcy, some of your property may be sold to pay down your debt. In return,
most or all of your unsecured debts (that is, debts for which collateral has not been pledged) will be erased. You get to
keep any property that is classified as exempt under the state or federal laws available to you (such as your clothes,
car, and household furnishings). Many debtors who file for Chapter 7 bankruptcy are pleased to learn that all of their
property is exempt.
Secured debt. If you owe money on a secured debt (for example, a car loan for which the car is pledged as a
guarantee of payment), you have a choice of allowing the creditor to repossess the property; continuing your
payments on the property under the contract (if the lender agrees); or paying the creditor a lump sum amount equal to
the current replacement value of the property. Some types of secured debts can be eliminated in Chapter 7
bankruptcy.

Eligibility for Chapter 7. Not everyone can file for Chapter 7 bankruptcy. For example, if your disposable income is
sufficient to fund a Chapter 13 repayment plan -- after subtracting certain allowed expenses and monthly payments for
certain debts -- you won't be allowed to use Chapter 7 bankruptcy.
Bankruptcy doesn't work on some kinds of debts. Though bankruptcy can eliminate many kinds of debts, such as
credit card debt, medical bills, and unsecured loans, there are many types of debts, including child support and
spousal support obligations and most tax debts, that cannot be wiped out in bankruptcy.

Chapter 13 Bankruptcy
Chapter 13 bankruptcy is also known as "wage earner" bankruptcy because, in order to file for Chapter 13, you must
have a reliable source of income that you can use to repay some portion of your debt.

Repayment. When you file for Chapter 13 bankruptcy, you must propose a repayment plan that details how you are
going to pay back your debts over the next three to five years. The minimum amount you'll have to repay depends on
how much you earn, how much you owe, and how much your unsecured creditors would have received if you'd filed
for Chapter 7 bankruptcy.

Debt limits. Your debts must be within limits set by the federal government: Currently, you may not have more than
$1,010, 650 in secured debt and $336,900 in unsecured debt.
Secured debts. If you have secured debts, Chapter 13 gives you an option to make up missed payments to avoid
repossession or foreclosure. You can include these past due amounts in your repayment plan and make them up over
time.

Other Types of Reorganization Bankruptcy
In addition to Chapter 13 bankruptcy, there are two other types of reorganization bankruptcy: Chapter 11 and Chapter
12.

Chapter 11 bankruptcy. Chapter 11 is typically used by financially struggling businesses to reorganize their affairs. It
is also available to individuals, but because Chapter 11 bankruptcy is expensive and time-consuming, it is generally
used only by those whose debts exceed the Chapter 13 bankruptcy limits (rare) or who own substantial nonexempt
assets (such as several pieces of real estate). If you are considering Chapter 11 bankruptcy, you'll need to talk to a
lawyer.

Chapter 12 bankruptcy. Chapter 12 is almost identical to Chapter 13 bankruptcy. But to be eligible for Chapter 12
bankruptcy, at least 80% of your debts must arise from the operation of a family farm. Chapter 12 bankruptcy has
higher debt ceilings to accommodate the large debts that may come with operating a farm, and it offers the debtor
more power to eliminate certain types of liens. Very few people use Chapter 12 bankruptcy; if you want to join their
ranks, you should consult with a lawyer.

Business Bankruptcy Options
While it's true that business bankruptcies are not necessarily the greatest experience in the world, they are a
necessary evil to help the owners and officers of a failing company find relief when they are out of options. Bankruptcy
can provide for liquidation of a company, reorganization, and a workable plan to satisfy as many creditors as possible.
To that end, business owners have many different business bankruptcy options when it comes to choosing the form of
their bankruptcy protection. In fact, there are six options according to federal law.
Business bankruptcy options usually take the form of one of the four following filings:
Chapter 7 - a liquidation process
Chapter 11 - a company reorganization
Chapter 13 - another company reorganization; usually reserved for sole writer ships
Chapter 12 - a special protection for family farms and fishing operations
Chapter 7 Liquidation
Chapter 7 liquidation can be used by sole proprietors as well as corporations, partnerships, and LLC's. In simplest
terms all non-exempt assets are surrendered to the court for liquidation. Once liquidation is complete, and the money
disbursed among creditors, that should be the end of it in most cases. Keep in mind however, that for a sole
proprietorship filing under Chapter 7, the business owner's personal assets are subject to the bankruptcy
proceedings. If there are any non-dischargeable debts involved, such as tax liens or alimony and child support, the
business owner will still be liable for them even after liquidation is complete.
When a corporation, partnership, or LLC decides to file under Chapter 7 company officers need to be prepared to
potentially put in quite a bit of time in the process. While some company liquidations can be accomplished very
quickly, sometimes it takes a number of years to sell off all company assets. In that time the owners and officers must
still keep their books, file their taxes, and be sure not to incur any more debt. Though rare, there have been cases of
some Chapter 7 liquidations that have gone on unresolved for years.

Chapter 11 Reorganization
Unless a business is facing a monumentally serious problem, Chapter 11 is the most common way to go. With a
Chapter 11 filing the company is allowed to remain in business and is free to maintain day-to-day operations as they
see fit. The only time the court intervenes is in approving a reorganization plan and approving or rejecting any major
expenditure that the business must undertake during the reorganization.

Chapter 11 reorganization is not available for sole proprietorships because they have nothing to reorganize in the
same sense as a corporation, LLC, or partnership. Where those other three types of businesses are considered
separate legal entities from their owners, a sole proprietor ship is not. If a sole proprietor wants the ability to
reorganize rather than liquidate he would file under Chapter 13.

Chapter 13 Reorganization
A Chapter 13 organization is very similar to Chapter 11, in that it allows for the sole proprietor to continue maintaining
ownership of his personal assets, continue the day-to-day operations of the business, and work out a repayment plan
with his creditors. Chapter 13 is probably one of the best business bankruptcy options for sole proprietors due to the
fact that they stand to lose so much if they choose a Chapter 7 liquidation. And just as Chapter 11 is not normally
used by sole proprietors, Chapter 13 is normally not used for corporations, partnerships, and LLC's.
Under Chapter 13 the sole proprietor will present to the court a plan to pay off creditors and emerge from bankruptcy.
If the court finds the plan suitable it will most likely approve the plan without intervention. However, sometimes a court
may intervene and reduce some of the indebtedness if it can be demonstrated that creditors are assessing
unnecessarily burdensome fees and interest rates.

Chapter 12 Special Protection
Family farms and fishing operations have one the most unique business bankruptcy options available exclusively to
them. The reason for developing a special chapter for these types of businesses lies in the nature of their financial
standing. Many times these businesses are passed down from one generation to the next with no clear delineation
ownership and share. The complicated nature of family farms and fishing operations requires some special rules.
Without getting into the details of all those rules, a simple explanation for Chapter 12 is to say it is very similar to
chapters 11 and 13 in that it is a reorganization plan. Under this business bankruptcy option, individuals who are
materially responsible for the family farm or fishing operation will submit to the bankruptcy court a plan that will
achieve full payment of debt within 3 to 5 years. If the court approves the plan creditors must cease and desist full
collection activities for all debts covered under the agreement. As long as the family-owned business remains faithful
to the court-approved plan everything goes well.

What we've given you here is a basic overview of the four most common options available to small businesses
considering bankruptcy. There are certainly many more details we have not covered in this article, but you can find
further information on specific bankruptcy laws and options throughout this website. Suffice it to say that if you need to
avail yourself of one of these business bankruptcy options, you obviously need some help; and possibly some relief.