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Big Names File Bankruptcy in 2009

As 2009 winds down, we'll take a quick look at some of the biggest brands and names in business that decided to file bankruptcy.

Big Brand Businesses Filing in 2009:

• Chicago Cubs - The Northsiders briefly entered bankruptcy protection when the team was sold.
• Phoenix Coyotes -The Coyotes are playing on, and playing well, despite failed attempts to sell the team.
• Six Flags -Theme park faced difficulty, but that old guy is still dancing
• Eddie Bauer -Clothing manufacturer sold, but still open.
• Reader’s Digest -Popular magazine still publishing.
• Trump Casinos -Maybe the Donald needs a new apprentice?
• The Philadelphia Inquirer -Rough year for newspapers across the country
• Chicago Sun-Times -Not to be out done by their crosstown rivals at the Tribune, the home of Rogert Ebert filed bankruptcy before being sold.
• Bennigans -The popular restaurant chain closed up shop after filing.
• Charter Communications -One of the country's largest radio station operators - 255 stations across the country.
• Ritz Camera - Still open, but forced to shutter some shops
• Samsonite -Luggage maker and retail store closed some shops, but still operating
• Tavern on the Green -Future of famed New York restaurant still up in the air
• Crabtree & Evelyn -Soap-seller still open
• Filene’s Basement - Deals still available as clothing store purchased and still open
• S&K Menswear -Suit retailer got unbuttoned, future still undecided
• Gottschalks -Department store gone for good
• Southern Voice – Large gay magazine in Atlanta quickly folded up
• New York Off Track Betting Corp -State-run betting offices muddied in debt
• Steak & Ale Restaurant and Roadhouse Grill -Steakhouses across the country got burned during the recession

Posted in 2009, Bankruptcy News and Events, celebrity bankruptcy, new year's eve | Comments Off

The Biggest Business Bankruptcy Filings of the Decade

This was a banner decade for big bankruptcy.

Of the 20 largest corporate bankruptcy filings in history, all but three of them occurred in the last decade.

The 2000s featured three businesses with more than $100 billion in assets filing for bankruptcy. All the companies in the list here held more than $30 billion in assets.

Combined size of the biggest companies filing bankruptcy this decade: $1.5 trillion. That would make them the 10th richest country in the world with a greater GDP than Canada, India, Mexico, Australia and most of Europe.

The Biggest Business Bankruptcies of Decade

Pacific Gas and Electric: $36.1 billion
April 2001
The story: After California deregulated the state’s energy industry, the state entered an energy crisis as companies couldn’t sell energy for more than they paid for it. Pacific Gas and Electric began taking on debt as Californians experienced rolling blackouts across the state. The company was bailed out by the state government, which provided cash for the company during its reorganization. While this move saved the company, it did add to the long list of budget problems still plaguing the state.

Enron: $65.5 billion
December 2001
The story: At one time Enron was one of the world’s leading energy companies, a blue-chip stock, and regularly lauded by the business world. But all of that began to unravel in the late 1990s as a massive accounting fraud and insider trading scandal was unveiled. Enron had been hiding losses in offshore companies for years, and falsely inflating their stock. When this knowledge became public, the company was forced to file what was then the largest bankruptcy filing in history.

WorldCom: $107 billion
July 2002
The story: In 2002, WorldCom was the second largest long distance phone company, but nearly $4 billion in billing fraud led to what was then the largest bankruptcy in US history. Following bankruptcy, the company changed its name to MCI and was later purchased by Verizon in 2005.

Conseco: $61.4 billion
December 2002
The story: A large insurance company based in Indiana, Conseco launched a financial arm of the company in the late 1990s with the purchase of a leader in the mobile home financing industry. The move proved costly, and led to bankruptcy reorganization early this decade. The plan worked in the short-term, and Conseco emerged ready to do business again, although late this year new financial concerns may be appearing.

Lehman Brothers: $691 billion
September 2008
The story: The Lehman Brothers bankruptcy filing is far and away the largest by an American corporation in history. Founded more than 150 year ago, it eventually grew into the third largest brokerage firm in the country, and the largest mortgage underwriter. The firm made a fortune during the housing boom earlier this decade, but was at the center of the subprime mortgage collapse. After a frantic search for buyers that turned up empty, and no help from the US government, Lehman collapsed. The company has continued to be in the news as bonus paychecks for executives at the firm have triggered outrage and scrutiny.

Washington Mutual: $327.0 billion
September 2008
The story: Another victim subprime mortgage victim in September of 2008, WaMu burst as quickly as the housing bubble that helped it grow into one of the largest banks in the country. But after the Lehman Brothers collapse, customers made massive withdrawals at WaMu for fears it would soon fold, too. The government quickly took over, and forced a sale to JP Morgan Chase, marking WaMu’s fate as the largest bank failure ever in the US.

Chrysler: $39.3 billion
April 2009
The story: Though not the first car company hit by weak sales and high loses, Chrysler was the first American automaker to file bankruptcy since Studebaker in 1933. The company was reorganized through bankruptcy and government invervention that led part of the company to be acquired by the United Auto Workers Union and another portion to be sold to Italian company Fiat.

Thornburg Mortgage: $36.56 billion
May 2009
The story: Thornburg specialized in “jumbo” adjustable rate mortgages: Those worth more than $400,000. But, as the value of these mortgages fell along with mortgage values across the board in the middle part of this decade, Thornburg was one of many mortgage companies with a bankruptcy case in the $30 billion range. Although the company officially entered Chapter 11, it sold its assets and was officially closed.

General Motors Corporation: $91 billion
June 2009
The story: The beleaguered car company was forced into bankruptcy earlier this year as the federal government poured in billions of dollars to keep the company afloat. The auto-maker’s executives had asked the government for financial help and declared they were close to insolvency. But in exchange for financial support, the feds wanted GM to be reorganized in Chapter 11. The bankruptcy led to the closing of brands Saturn and Pontiac; Hummer was sold to a Chinese company; and the future of Saab is still up in the air.

CIT Group: $71 billion
November 2009
The story: CIT Group is one of the largest commercial lenders in the country, specializing in loans to small and mid-size businesses. But they lost $3 billion over two years, and continued to struggle despite receiving billions in cash and loans from the federal government and other lenders. Despite plans to emerge quickly, their bankruptcy raises questions on how small businesses, including 2,000 vendors supplying goods to 300,000 stores, will be affected.

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Top 10 Celebrity Bankruptcies of the Decade

It's been a rough decade economically, and not even celebrities were immune from financial turmoil. Some of the names on this list were no longer in the spotlight, while others encountered difficulty at the peak of their fame.

This list includes those who filed on personal debts as well as celebrity business owners who used bankruptcy to protect their brand.

1. Randy Quaid (2000): The actor, famous for his role as Cousin Eddie in the National Lampoon's Vacation movies, had a rough decade. He ran into money problems and filed bankruptcy in 2000, ironically over a film called "The Debtors", which starred Quaid, was directed by his wife Evi, and was produced by the couple. The decade ended with Randy Quaid banned from stage acting, and the Quaids arrested for allegedly defrauding an innkeeper.
2. Stan Lee (2001): Creator of Spider-Man, The Fantastic Four, The Incredible Hulk and The X-Men, Stan Lee got caught up in the dot-com bubble of the late 1990s. He and a business partner created Stan Lee Media, an internet-based comic book venture. However, the company quickly burned through its capital, Lee's partner was accused of securities fraud, and Lee and the company filed Chapter 11 bankruptcy.
3. Mike Tyson (2003): After retiring from boxing and going through a divorce (plus getting a facial tattoo), the former Heavyweight champ found his finances in disarray. Tyson blamed lavish spending on cars, mansions and Bengals tigers, plus poor financial advice, for the state of his affairs, leading to his 2003 bankruptcy.
4. Lorenzo Lamas (2004): The former Renegade and soap opera star file bankruptcy for debts that included $200,000 for a private jet. He also owed on a Harley-Davidson motorcycle, a H2 Hummer, and alimony for his four ex-wives.
5. Donald Trump (2004, 2009): Trump's Atlantic City hotel & resort company filed Chapter 11 bankruptcy twice this decade in order to reorganize debts related to construction. In the first bankruptcy in 2004, Donald Trump gave up his majority stake in his Trump Hotels & Casino Resorts company to creditors, which reemerged as Trump Entertainment Resorts. The second time around in 2009, Trump stepped down from the board. Trump has since reached a deal to reacquire the company.
6. Michael Vick (2008): Vick's financial problems were directly tied to his legal ones. After being convicted on federal dog-fighting charges, Vick was left was heavy fines and no income to pay his obligations (or entourage). Vick, once of the highest-paid athletes in the country, filed bankruptcy from behind bars in 2008.
7. Bill Buckner (2008): Sports fans will know that Bill Buckner is no stranger to bad luck. Despite a productive career in Major League Baseball, his error in Game 6 of the 1986 World Series became his legacy. After retiring, Buckner moved to Idaho and founded a car dealership. It was another error, and Buckner was forced to file bankruptcy in 2008 to recoup his losses.
8. Lenny Dykstra (2009): Another baseball star, Dykstra became an entrepreneur after retiring from the Major League, and founded The Players Club, a glossy magazine for athletes, in 2008. The venture tanked, and led to at least 20 lawsuits. As a result, Dykstra filed Chapter 11 bankruptcy.
9. Stephen Baldwin (2009): The youngest brother of the acting family, Stephen Baldwin had a resurgence this decade—as a professional reality show cast member. However, his appearance fees were not enough for the actor to keep up on his mortgage and other debts. Baldwin and his wife filed bankruptcy in New York in early 2009 as their home was in foreclosure.
10. Sinbad (2009): The one-named comedian may have made a career as a family-friendly entertainer, but allegedly failed to pay taxes on his income from Jingle All The Way and his other hits. The state of California filed a lien for more than $2.5 million in unpaid taxes in 2008. Sinbad filed bankruptcy in December, 2009.

And an honorable mention goes to...

• Jose Canseco (2008): The baseball star and New York Time best-selling author didn't file bankruptcy, but he did walk away from his Encino, Calif., mansion, which went into foreclosure after he stopped paying the $2.5 million mortgage. Canseco was one of the first celebrities to admit being caught up in the foreclosure crisis.

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I want to file for personal bankruptcy. How will this affect my membership in an LLC?

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The National Debt Road Trip

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Eighty Percent Interest on a Credit Card

The Credit Card Accountability Responsibility and Disclosure (Credit CARD) Act of 2009, which will take full effect in February, limits many practices now common in the credit card industry. Some, however—like issuing a card with an interest rate near 80 percent—will still be permissible under the new law.

Subprime Credit: Still a Bad Idea

The subprime lending boom and the “unconventional” lending techniques that accompanied it were major factors in the housing market’s explosion and collapse, and thus the current recession.

But just because people have grown more wary about some types of subprime lending doesn’t mean it’s disappeared entirely. In fact, according to an MSNBC article, some of the worst credit cards on the market are still as costly as ever.

The First Premier credit card reportedly provides a source of credit for people with limited or shaky credit histories – that is, the so-called subprime borrowers. But, because of the potentially high risks associated with having a blemished credit history, this card comes with some shockingly expensive terms:

• Initial limit of $300: Users of the First Premier card will have access to only $300 in credit when they open their accounts, an increase from the card’s former limit of $250. But that’s not even as much as it seems.
• Maximum permissible fees: The Credit CARD Act prohibits issuers from charging fees that total more than 25 percent of a card’s limit, and the First Premier charges exactly that: $75 in fees each year. Formerly, the first year’s fees totaled $256 – on a $250 limit.
• Astronomical interest rate: Presumably to make up funds lost from the limited fees, the First Premier issuers jacked up the interest rate on their card to a whopping 79.9 percent. The new law sets no limit on credit card interest rates, so while shockingly high, this limit is legal.

Avoid the Trap: Wait It Out

Naturally, getting tangled up with a card that carries a nearly 80 percent interest rate is not a good idea, no matter how badly you want to start rebuilding your credit after a bankruptcy filing or other financial stumbling block.

If you currently have a rough or limited credit history and don’t think you’ll qualify for a credit card with more favorable terms, your best bet may be to simply wait a while. With a few months or years of responsible and timely bill paying, you may qualify for much better credit products.

Additional Resources

Credit CARD Act of 2009 (PDF)

Posted in Credit Card, Credit and Bankruptcy, Interest Rates, subprime lending | Comments Off

FTC & BBB: Avoid Free Trial Scams

The Federal Trade Commission recently released a statement warning about the potential cost of free trial offers that end up costing consumers significant amounts of money. The warning, made jointly by the FTC, the Better Business Bureau (BBB) and Visa, includes red flags to watch out for and action to take to avoid getting scammed.

The “Negative Option”

Offering free trials is a common technique companies use to introduce consumers to new products and services. Sometimes, though, free trials are offered by scammers bent on collecting money from unsuspecting consumers. Often, the scam works like this:

• Emphasis on free: An online advertisement may offer something free (usually for a trial period), available to you by clicking a link. In most cases, you’ll have to enter a credit card number of some sort.
• Excessive fine print: In the fine print, the offer notes that, once the trial period is over, you will be charged for the product or service unless you cancel it. This is known as the negative option, because you must opt out in order to stop paying.
• Charges to your card: Once the trial period ends, your account will be automatically charged on a regular basis for the product or service. Even if you cancel after a month, you can end up paying significant money for something you never wanted.

Avoiding Free Trial Scams

So how can you make sure you aren’t lured in by an expensive online scam? Here are some tips, as posted on the FTC’s web site.

1. Read everything. If there’s more fine print than you care to sift through, that’s usually a bad sign. Any time you’re giving out personal information, make sure you know exactly what you’re getting yourself into.
2. Note the checks. Some offers trick customers by pre-checking boxes that seem insignificant but actually include continued-payment agreements. Uncheck any boxes that offer something you don’t want.
3. Review your statement. When your credit card bills arrive each month, check for strange or questionable charges.
4. Take action. If you do find any charges that you don’t agree with, call the merchant and ask to have the charge clarified, and, if necessary, removed. If you cannot work anything out with the merchant, contact your card issuer and contest the charge.

If you think you’ve been scammed by a free trial offer, don’t hesitate to file a complaint with the FTC or contact the BBB in your state.

Additional Resources

FTC’s Risk-Based Pricing Notice (PDF)

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