6 Celebrities Gone Bankrupt
Willie Nelson and the taxman
Claiming to owe the Internal Revenue Service $16.7 million, country singer Willie Nelson declared bankruptcy in 1990. The IRS seized his bank accounts and his real estate. To raise money for back taxes, Nelson released the album, "The IRS Tapes: Who'll Buy My Memories?" Eventually, he paid back the IRS in 1993.
"Paying taxes should be your No. 1 priority," says David Miles, who represents taxpayers before the IRS in Broomfield, Colo. "No companies have the power of enforcement that the IRS does, and they will get their money."
The worst thing you can do is not file your income tax return, Miles says. The IRS gets very upset when it doesn't know what's happening, so communication is imperative. As soon as you know you owe taxes, contact the IRS -- first in writing, then by phone at (800) 829-1040 -- and request a strategy on how to repay the debt. That might be paying the IRS in installments or settling for less if the taxpayer can demonstrate he wouldn't be able to pay off the debt over time.
If you owe back taxes, it's a good idea to hire a qualified professional to help you. But even with professional help, you need to remain a part of the process.
Walt Disney had no choice
When Walt Disney started creating his own cartoons and his main client went into bankruptcy, Disney was forced to declare bankruptcy himself. If you've ever been to one of Disney's theme parks, you know that he used his money failure as an opportunity for a fresh start and went on to become one of America's great success stories.
Disney's story proves that with the right mindset and the right planning, you can emerge from bankruptcy with little or no burden afterward, says Barry Pulchin of Metis Group CPAs LLC in Plainview, N.Y.
"You need to have the mindset of an entrepreneur," Pulchin says. "Working the traditional 9 to 5 won't create wealth."
Instead, you have to be a go-getter or a person with vision, and you'll need experts to guide you, Pulchin says. That's why advance bankruptcy planning is necessary. You need to decide which type of bankruptcy is best for your circumstance -- Chapter 7, 11, 12 or 13 -- and you'll need guidance for that.
"Even though bankruptcy adversely affects your credit rating, some creditors see it as an attempt by you to better yourself," Pulchin says.
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