The 8 Worst Bankruptcies in History

16 Oct


Throughout history, there have been a number of successful people who have built great fortunes.  Many of these people were able to enjoy their riches, while leaving enough for future generations to enjoy.  There have also been others who have earned vast amounts of money, only to be squandered away, ending in bankruptcy.  Similarly, companies have been built into opulent empires that have been later reduced to rubble with a simple turn of tides.  In this article are eight examples of some of the worst personal and corporate bankruptcies in history.

Historical personal bankruptcies

1.   Jakob Fugger

Jakob Fugger is a 15th and 16th century merchant and banker who amassed such a fortune that he came to be known as Jacob The Rich.  Throughout the Renaissance, Fugger played an important role in supporting major political and religious figures.  He contributed over 540,000 (over 1,500 kilograms worth of gold) florins to help Charles V win the title of Holy Roman Emperor  by paying off the electors.(1) Fugger also funded the construction of what is known today as Vatican City.(2)  While Jakob was able to accrue enough riches to last for generations, many of his descendants would squander away the wealth and not much is left of it today.(3)

2.   Henry Ford

Henry Ford is well-known as the founder and owner of Ford Motor Company.  Many of Ford’s inventions reshaped and revolutionized the entire transportation industry and the history of America as a whole.(4)  Before getting things right with the Ford Motor Company, however, Henry Ford had troubles with debt.  Ford borrowed money from a few politicians and started the Detroit Automobile Company in 1899.  Two years later, the company went bankrupt, almost forcing Ford himself into bankruptcy.(5)  After leaving the Detroit Automobile Company, which would later develop into the Cadillac Automobile Company, Ford founded the Ford Motor Company and became one of the richest and most well-known people in the world.(4)

3.   Mike Tyson

In more recent years, another sizable case of bankruptcy occurred when Michael Gerard Tyson filed for bankruptcy in 2003.  Mike Tyson is one of the most popular, well-known and notorious figures in professional boxing.  He fought his way to to the top of the boxing world, becoming the youngest person to win and hold the title of heavyweight champion.(6)  Some of Tyson’s most lucrative boxing matches earned him over $30 million each.  It is estimated that he earned between $300 million and $400 million throughout his career, but he ended up filing for bankruptcy in 2003 as a result of poor money management.

4.   Charles M.  Schwab

Charles Michale Schwab was a powerful and extremely rich man who helped lead a large steel corporation to success.  Schwab’s career began as a stake driver in a steelworks company, which he later became the president of.  He negotiated the sale of the company and became the president of the newly formed corporation known as U.S. Steel.  Later on, Schwab ended up leaving the company to become the president and chairman of the board for Bethlehem Steel Corporation.(7)  The company became one of the largest steel producers in the world and Schwab became extremely rich.(8)  Schwab had a hankering for excessive spending on extravagant parties, gambling and extramarital affairs, which would cause his fortune to dwindle.  In 1929, the stock market crash forced Schwab into bankruptcy.  His fortunes were estimated at around $25 million to $40 million, which would have been equivalent to around $500 million to $800 million today.(7)

Historical corporate bankruptcies

1.   Lehman Brothers

One of the most recent corporate bankruptcies, which occurred in 2008, holds the title as the largest bankruptcy case in history.(9)  Lehman Brothers Holdings Inc. is a firm that offered financial and investment services worldwide.(10) Before filing for bankruptcy on September 15, 2008, the firm was worth over $600 billion in assets.  Causes for the bankruptcy date back over seven years, during the 9/11 attack, but the biggest cause was the financial crisis of 2008.(11)

2.   WorldCom

WorldCom Inc., known today as MCI, Inc., was forced to file for bankruptcy in 2002.  The WorldCom Inc. bankruptcy stands as the second-largest bankruptcy case in the history of the United States.  The company’s pre-filing assets amounted to over $100 billion.(12)  The main cause for the fallout was the numerous fraud cases that the company and its executives had to face.  Since declaring corporate bankruptcy bankruptcy, WorldCom Inc. has merged with MCI Communications to form MCI, Inc.(13)

3.   Enron

Enron Corp. currently holds the record for the third-largest bankruptcy filing in US history.(14)  The American energy company was founded in 1985, and quickly became a large tycoon worth revenues approximated at around $101 billion in 2000.(15)  Enron Corp. filed for bankruptcy in 2001, with their total assets amounting to about $66 billion before filing.(14)  Cases of accounting fraud and business fraud that became known as the “Enron scandal” were the main causes for the bankruptcy.(15)

4.   Conseco, Inc.

Before filing for bankruptcy in late 2001, Conseco, Inc.’s assets were estimated at over $60 billion.(16)  Conseco was an insurance organization that offered life insurance, supplemental health insurance, annuity and other financial products and services.  The company’s debt amounted to $8 billion, forcing them to file for bankruptcy.(17)  The company was not able to rebound until 2003.

These historical riches-to-rags stories can be seen as large, red, flashing warning signs of what to look out for in order to avoid bankruptcy.  Sure, some bankruptcies are caused by bad and perhaps even uncontrollable circumstances, but there are a number of ways that your can safeguard yourself or your company from bankruptcy:(18)(19)

1.   Understand how personal bankruptcy and corporate bankruptcy works.
2.   Make sure to have good legal and financial advisors with great track records, especially for corporate dealings.
3.   Keep accurate and honest accounting records that will help you make accurate and honest decisions with regard to finance, legal, and bankruptcy matters.

One of the biggest lessons to be learned by these historical bankruptcies is that there can only be two bankruptcy fates: 1) stay bankrupt, or 2) earn back your fortune.  Even if you fall and go bankrupt, it is not the end.  With determination, hard work and clear goals anyone can rebound from a bankruptcy.

Sources:

(1)  http://en.wikipedia.org/wiki/Fugger
(2)  http://remus.shidler.hawaii.edu/genes/Bavaria/augsburgfugger/home.htm
(3)  http://remus.shidler.hawaii.edu/genes/Bavaria/augsburgfugger/fugger.htm
(4)  http://en.wikipedia.org/wiki/Henry_Ford
(5)  http://www.cnn.com/2008/LIVING/personal/11/19/mf.successful.people.survived.bankruptcy/index.html
(6)  http://en.wikipedia.org/wiki/Mike_Tyson
(7)  http://en.wikipedia.org/wiki/Charles_M._Schwab
(8)  http://en.wikipedia.org/wiki/Bethlehem_Steel_Corporation
(9)  http://www.time.com/time/specials/packages/article/0,28804,1841334_1841431_1841342,00.html
(10)  http://en.wikipedia.org/wiki/Lehman_Brothers
(11)  http://en.wikipedia.org/wiki/Bankruptcy_of_Lehman_Brothers
(12)  http://www.time.com/time/specials/packages/article/0,28804,1841334_1841431_1841349,00.html
(13)  http://en.wikipedia.org/wiki/Worldcom,_Inc.
(14)  http://www.time.com/time/specials/packages/article/0,28804,1841334_1841431_1841352,00.html
(15)  http://en.wikipedia.org/wiki/Enron
(16)  http://www.time.com/time/specials/packages/article/0,28804,1841334_1841431_1841355,00.html
(17)  http://en.wikipedia.org/wiki/Conseco
(18)  http://www.ehow.com/how_4783043_avoid-personal-bankruptcy.html
(19)  http://www.ehow.com/how_2140357_defend-against-bankruptcy-fraud-charges.html

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