When Famous People File for Bankruptcy & What it Means for All Financially Struggling Americans
On March 20, 2013, legendary singer Dionne Warwick and cousin of Whitney Houston (singer of the hit song “Do You Know The Way To San Jose”) filed for Chapter 7 bankruptcy.
When famous people like Ms. Warwick file for bankruptcy help, we are reminded that anyone can run into hard times. Tyler Perry, JK Rowling, Donald Trump, Jennifer Hudson have all filed for bankruptcy assistance – to name just a few. Others include great Americans like Henry Ford, Thomas Jefferson and Abraham Lincoln.
Thankfully, America’s bankruptcy laws give every American a right to a second chance. In fact, the right to a bankruptcy “fresh start” is enshrined in our Constitution. The right to bankruptcy help was our “founding fathers” reaction to England’s harsh debtor laws. England’s inhumane debtor prisons were immortalized and indicted by the stories of Charles Dickens. Yes, our very Constitution rejects harsh treatment and embodies the idea that everyone deserves a second chance when they lose a job, suffer from an illness or just become overwhelmed trying to make ends meet when they hit a low point in their lives. Good people, even the best people, need help sometimes.
Take the examples of Henry Ford, Thomas Jefferson and Abraham Lincoln.
Henry Ford had two bankrupt companies before he succeeded with a third. If our laws didn’t give Henry Ford a chance to learn from his mistakes, we never would have had the Ford Motor Company and all of the benefits he gave us when he invented “mass production”. And speaking of cars, GM, General Motors, was saved by a bankruptcy only four years ago. Now, GM has become the biggest, most successful car company in the world. They are hiring more workers all the time. Thank goodness, GM’s bankruptcy gave them a second chance.
Take the example of one of the greatest Presidents. Thomas Jefferson, the author of the Declaration of Independence and the man who wrote that all of us are created equal and have the right to the pursuit of happiness, died on July 4, 1826. When he passed away, his savings had been lost – largely because of a drop in the price of his home almost like today – and he owed over $100,000 when he died.
And finally, take the case of Abraham Lincoln. When he was young, Abraham Lincoln had a bankrupt store. Many of his possessions were sold at auction to pay his creditors including his saddle. A friend attended the auction. He purchased Lincoln’s saddle. He gave the saddle back to Lincoln. Lincoln used it to ride to Springfield, Illinois to become a lawyer. His second chance changed history.
Can any one of us say that we are better people than these great individuals? I don’t know anyone – anyone I know well – that hasn’t financially struggled sometime during their lives.
America’s bankruptcy law is a recognition that life is about more than money. Life is about helping each other especially when that help is needed most. Isn’t that the basis of all the world’s great religions?
Ms. Warwick’s Chapter 7 bankruptcy in New Jersey is going to turn out alright. Today, most people who file bankruptcy in New York and New Jersey can recover pretty good credit in 2 to 3 years. People even qualify for mortgages three years later. No credit for 7 to 10 years after bankruptcy is just a myth.
Banks even offer credit cards right after bankruptcy. I was recently quoted in a front page New York Times story about how Banks send bankruptcy filers new credit cards even before the case is over. The banks are just trying to get struggling people in trouble again. I tell my clients to have at least two new credit cards to recover their credit score. But, I remind them that the banks are like devils trying to tempt them to borrow too much because the banks know that they are struggling. “Resist temptation and rebuild your credit” is my motto.