How I Went Bankrupt at 23

Amanda ChatelBy Amanda Chatel

For as long as I can remember, my father warned me about the dangers of credit cards.

After I got my first job the summer after high school senior year, it became clear just how irresponsible I was with that minimal income. The second I got paid, I would spend it.

It's not as though I was buying anything I needed because at the time I was living at home. However, that didn't stop me from figuring out ways in which I could burn through my funds. As a result, my parents suggested I never ever get a credit card, because it was guaranteed to lead to trouble. "Not only is math not your strong suit," my dad warned, "but you also have zero concept of the worth of a dollar."

He was right.

I was only a few weeks into my first semester of college when a credit card company in the Student Union Building lured me in with promises of "building credit," "learning responsibility," and, more importantly, access to invisible funds that were not mine. I was sold.

I put down my parents' combined income (since I was a student, after all), and received my first credit card a couple weeks later. I didn't tell my parents because I was 18 years old, mature and ready to prove them wrong.

Me and My Card

Being a grown-up means starting a credit history (of course) so I made my first purchase: shoes.

That was fun and easy, I thought.

I waited until my first paycheck -- I had a work-study job -- paid off the shoes in their entirety, then bought some more shoes. With a minimum payment of $15, I decided I could buy lots of things. I also bought clothes. And treated my friends to lunch if they didn't have the money.

Once the pizza place started taking credit card numbers, I ordered pizza for me and my roommate almost every night instead of going to the dining hall.

By the time sophomore year rolled around, I had two credit cards and a couple of thousand dollars in debt.

But hey, I got a part-time job at the Gap, which paid a whopping $8.50 an hour; in other words, I was about to hit the big time. However, working at Gap meant wearing their clothes. Before my first day, I bought several "key" pieces in preparation for my fancy new job.

Retail comes with some major perks, especially if you're a college student who firmly believes you can never have too many clothes. I felt it my responsibility to take advantage of my 50% off regular-priced items and 20% off sale stuff.

Enter: Credit Card Number Three

I got a third card because I was pushing my limits on the other two. I had things to buy, a new gorgeous boyfriend who was an art student in Boston, and someone had to pay for things!

When you're applying for a new card, hey, I figured, just put down your parents' combined income and "pad" it a bit with what you assume you'll eventually be making with your fancy degree in English. Voilà!

A few weeks later, I could feel the sturdiness that comes with a new credit card in the mail. My fella and I would be going to Bella Luna -- a great little restaurant downtown that we college kids usually only hit up when our parents were in town -- this weekend after all!

My monthly minimums between the three credit cards were only around $150. No problem! I had a job, and if I couldn't swing it, I'd call Mom and Dad for grocery money. Problem solved.

... And Then a Fourth

Once I reached senior year, the boyfriend and I had broken up and I was in need of retail therapy that could only be accomplished with a fourth (and final) credit card.

By this time, my parents knew about my cards, my father had done his fair share of yelling and had bailed me out several times for my monthly minimums already. But with my credit balance pushing $18,000, I was only given a $1,000 minimum.

Considering my previous lifestyle, $1,000 wasn't going to cut it. I bought myself some shoes, Grey Goose vodka, pizza and went home to drown my sorrows (with my shoes on, of course, as they cost a pretty penny).

By the time I graduated from college, I was somewhere between $20,000 and $25,000 in debt, thanks to not only my complete and utter lack of responsibility, but also to late fees and ridiculously high interest rates.

What Was I Going to Do About $25,000 in Debt?

My parents had washed their hands of helping me, because I ignored their warnings, and, frankly, it was not their responsibility to help me if I was too stupid to realize what I had done.

True to form, I defended myself: I'm an English major! Numbers are not my thing! Credit card companies are liars! But really, the only person lying to me was myself.

After graduating, once that first college loan kicked in, I knew I had royally screwed myself. Not only was I in debt to the credit card companies, but I was also in debt to the University of New Hampshire for a hefty sum, too.

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I moved back to my parents' house and tried to come up with a game plan. That plan? I was going to finally move to New York City to be a writer!

"You're not going anywhere," said my father. "You're going to get a job here, fix this mess, save up, and then you can do whatever you want with the rest of your life."

"But I can't be a writer in New Hampshire!" I protested.

"You should have thought of that when you were blowing money left and right."

How I Decided to File Bankruptcy

Living at home, I got a job in the admissions office at a local college, which didn't cut it financially, even if I was living rent-free at my parents' house.

So I decided to file for bankruptcy.

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How I Went Bankrupt at 23

After getting his start on the stage, Sherman Hemsley moved to television in the role of George Jefferson on All in the Family and its spin-off, The Jeffersons. Despite the enormous success of the latter, which ran for 11 seasons on CBS -- and the fact that he continued to work steadily on television after The Jeffersons ended -- Hemsley filed for Chapter 13 in June 1999, saying he lacked sufficient funds to pay back a $1 million loan from a Las Vegas investment corporation, as well taxes owed to the IRS. Hemsley later withdrew the case and resolved his debts out of court.

In 1989, the actress and former model was persuaded by family members to buy a small town in Georgia called Braselton for $20 million, in partnership with the Ameritech Pension Fund. The idea was to turn the town into a tourist attraction featuring movie studios and a film festival, but Basinger found herself being sued for breach of contract after withdrawing from a film called Boxing Helena. Unable to pay the resulting $8.1 million in damages, she filed for bankruptcy in 1993 and two years later sold her stake in Braselton to Ameritech.

Basinger’s fortunes soon turned around, however. A higher court overturned the judgment against her, and she settled with the studio for $3.8 million. In 1997, she attained the pinnacle of Hollywood artistic recognition, winning an Academy Award for her performance as a Veronica Lake-lookalike call girl in L.A. Confidential.

In 1992, Mr. Las Vegas filed for Chapter 11, despite having been a working entertainer since high school. (His first television appearance was at age 19, on The Jackie Gleason Show.) Newton was forced into bankruptcy because of approximately $20 million of debts he incurred in the course of suing NBC for libel; the network news had reported that “organized crime was involved in his purchase of a hotel casino.

By 1999, Newton was back in the black, but his financial issues continued. In 2005, the IRS sued him for more than $1.8 million in back taxes and penalties. In 2009, officials at a Michigan airport claimed that Newton owed more than $60,000 in unpaid storage fees after abandoning a plane there more than three years previously. Newton later had the plane disassembled and shipped to his Vegas estate, Casa de Shenandoah, where he kept it in the yard.

Heavy metal frontman, frequent drunk driver, bereaved father, and serial entrepreneur: Vince Neil Wharton has worn many hats, including that of the insolvent debtor -- twice. In 2010, the Mötley Crüe singer’s bankruptcy lawyer sued him, after five years in court, for unpaid legal bills, saying Neil owed him $16,000. So not only did Neil manage to lose all his money twice, he also failed to find a way to pay the man charged with saving his bacon.

The former undisputed heavyweight champion of the world filed for Chapter 11 in August 2003, after having received nearly $300 million in ring earnings. Tyson “spent extravagantly on mansions, Bentley cars, jewellery, and even pet Bengal tigers while buying gifts for his lavish entourage,” the BBC reported at the time.

In May 2010, Tyson told the hosts of the The View, “I’m totally destitute and broke. But I have an awesome life, I have an awesome wife who cares about me… I had a lot of fun. It [losing all his money] just happened. I’m very grateful. I don’t deserve to have the wife I have, I don’t deserve to have the kids I have, but I do, and I’m very grateful.”

Alec’s brother, an actor like all the Baldwin boys, filed for Chapter 11 in July 2009, after defaulting on his mortgage loan -- this after starring roles in such notable releases as The Usual Suspects (1995) and The Flintstones in Viva Rock Vegas (2000). Baldwin said he had debts of more than $2.3 million. It was also reported that Baldwin owed money on another mortgage, and possibly tens of thousands of dollars in unpaid state and federal property taxes.

These days, Baldwin is better known for versions of his own persona -- Evangelical Christian, outspoken conservative, reality television contestant -- than his thespian roles. He is currently suing Kevin Costner "for $3.8 million over a tiff involving oil-separating technology that the Waterworld actor pushed to help solve the BP oil spill in the Gulf of Mexico," EW reports. Costner's lawyers filed a motion to dismiss on Feb. 1.

Stanley Kirk Burrell made a fortune informing the world that “U Can’t Touch This,” eventually selling more than 50 million records globally. But he wasn’t as committed to self-restraint: In 1996 Hammer filed for Chapter 11, telling a California bankruptcy court he was $13.7 million in debt and had assets of only $9.6 million. Among the debts was a $110,000 sum owed to an interior decorator whose business failed because of Hammer’s nonpayment. The rapper went on to become a minister.

In the 1980s, Canseco was one-half of the Oakland Athletics’ Bash Brothers, the one-two home-run-hitting machine he formed with teammate Mark McGwire. In 1988, Canseco became the first player in major league history to hit at least 40 home runs and steal at least 40 bases in the same season; that same year, he was named the American League’s Most Valuable Player. But injuries slowed him down. After several spasmodic comebacks -- the most successful of which, in 1998, was completely overshadowed by McGwire’s home run duel with Sammy Sosa -- Canseco retired in 2002. The Los Angeles Dodgers declined to offer him a spot in 2004, after a spring tryout.

As a career, it was a curious blend of triumph and disappointment. But it turned out to be the prelude to a lurid retirement that included repeated runs-in with the law and two enormously expensive divorces. In 2005, Canseco made headlines with a bestselling book called Juiced: Wild Times, Rampant ’Roids, Smash Hits and How Baseball Got Big, in which he confessed to using anabolic steroids and outed several former players as fellow juicers -- among them, McGwire. In 2008, Canseco walked away from his $2.5 million, 7,300-square-foot mansion in Encino, Calif., which went into foreclosure. Not quite a bankruptcy, but still an impressive financial failure for such a formerly powerful earner.

1993’s Playmate of the Year parlayed her Playboy success into modeling work for Guess jeans (replacing supermodel Claudia Schiffer) and a brief film career (including a role in the final Naked Gun movie). Previously, Smith had worked at Walmart, Red Lobster, and as a stripper.

But it was probably her second marriage, to octogenarian oil mogul J. Howard Marshall, that brought Smith the most notoriety, if not the most money: After taking a serpentine path through the courts, Smith’s inheritance case -- which continued after her death in the name of her young daughter, Dannielynn Birkhead -- was ultimately settled by the Supreme Court. The justices ruled against Smith’s estate.

Smith’s rendezvous with bankruptcy came in 1996, after she lost a default judgment in a $830,00 sexual harassment suit brought two years earlier by her former nanny. The case was settled.

To be fair, Disney went broke at the tender age of 21 -- unlike the others on this list, before he got rich. He had founded a company called Laugh-O-Gram, an early attempt at an animation studio, which set out to make a film version of Lewis Carroll’s Alice in Wonderland. The production was plagued by difficulties, and a near-indigent Disney declared bankruptcy -- “though Walt said he could have technically avoided responsibility by claiming that he was a minor at the time of the company’s incorporation,” writes Neal Gabler in Walt Disney: The Triumph of the American Imagination.

“Most people filing for bankruptcy are disturbed or bitter,” said the attorney who handled Disney’s case. “Walt wasn’t.” Disney’s optimism and confidence were well justified: The next company he founded had total revenues of more than $38 billion last year.

Samuel Langhorne Clemens, the man who coined the phrase 'the Gilded Age,' was as bad as managing money as he was good at making it. A technology enthusiast, he lost most of his lucre (and much of his wife’s inheritance) investing in an automatic typesetting device called the Paige Compositor, which was rendered obsolete before it could be made to work properly.

Twain filed for bankruptcy in 1894 and was thereby relieved of his debts, but resolved to pay them back anyhow. He embarked on a lecture tour of Europe for the next four years, earning enough money to reimburse his former creditors. Twain went on to become much in demand as a public speaker.


A friend of the family suggested the idea. As the friend, who worked in finance, explained, there was no way I was going to get ahead money-wise if I didn't try to wipe clean the slate of my "youthful mistakes," and start anew.

Initially, I was completely against this, as were both my parents.

But, this friend explained, the debt had gotten so out of control I'd have to start making well over $100,000 stat (and still live with my parents) to just get even with the creditors. All that before I could even start dealing with my student loans!

After the judge approved the bankruptcy, I walked away with a clean slate ... and the inability to have credit cards for the next seven years. It seemed like a fair deal considering what I had done, so I reveled in the weight that had been lifted. I also felt embarrassed it had come to that point.

10 Years Later: What I'm Doing Now

Looking back, I clearly see not only the irresponsibility on my end, but the selfishness. I believed my parents would bail me out, as they always had, but I just kept taking and taking.

A few years after moving to New York City, I applied for a credit card again. Surprisingly, I got it. Before I could get into the same mess again, I bought a couple of things, paid them off immediately and cut up the card. The only credit card I have in my wallet these days is a Bloomingdale's card with a very low minimum that I keep just in case I want to treat myself to something small.

It's been 10 years since I filed for bankruptcy, and although I'd like to be able to say I learned a lesson about money, that would be a bit of a lie.

I did learn that when it comes to money I am, for lack of a better word, an idiot. I have yet to discern the meaning between need and want.

However, as someone who is now completely aware of this, I do make a valiant effort to be wary of how I spend my funds. I make sure bills are tackled first, groceries second, savings third, and only then will I indulge in things I want but don't technically need.

Apparently, people don't need over 30 pairs of shoes. And sadly, for me that has been the most difficult lesson to learn.

Amanda Chatel is a writer based in New York City.

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