A bankruptcy is a legal process in which an individual or legal entity declares that he or it is no longer able to meet financial obligations to creditors and is deemed insolvent. By declaring bankruptcy the debtor can pay his creditors under a repayment plan approved by the bankruptcy court; the court can also discharge certain debts in order to give the debtor a fresh start. Usually, any payment plan pays eligible creditors only a percentage of what is owed. In most cases, the debtor is able to retain most of his or her personal property and residence pursuant to the laws of his or her resident state.
There have been a number of well-known celebrities who have had to file for bankruptcy protection. Burt Reynolds once owned mansions and a Florida ranch. After some of his movies failed and his marriage cost him a large percentage of his assets, he found himself owing about $10 million. In 1996, he sought bankruptcy protection under Chapter 11. This allowed him to keep his Florida home and to pay back part of his debt over a two-year period.
Donald Trump, the self-proclaimed financial mogul, filed for Chapter 11 protection twice in the 2000s. In 2004, he had to relinquish his majority interest in Trump Hotels & Casino Resorts, which became Trump Entertainment Resorts. In 2009, the company again filed for Chapter 11 Bankruptcy when the company registered debts of $500 million in bank debt and $1.25 billion in bond debt. On April 12, 2010, the bankruptcy court in New Jersey approved a reorganization plan.
Willie Nelson and Larry King have managed to put their careers back on track after each encountered serious financial difficulties with the IRS or with an accusation of theft in the case of Larry King.
Stephen Baldwin filed for Chapter 11 protection in New York in 2009 with court records indicating he owed $70,000 in credit card debt and more than $1 million in back taxes. He was forced to default on his New York residence.
