Submitted by Rachel R on Fri, 05/23/2014 - 7:53pm
Lorenzo Lamas filed his second Chapter 7 bankruptcy in less than a decade
Today in celebrity bankruptcy news, Lorenzo Lamas has received another Chapter 7 bankruptcy discharge – his second in nine years. This is uncommon for either a celebrity or your average North Carolina bankruptcy filer. But then again, Lamas has not made choices that are common. So what can we learn from this celeb filer that has not gone into bankruptcy once, but twice?
Plenty. First we'll look at the difference between his two filings, and then the underlying money issues that are causing his ongoing financial problems and how this can inform your financial decisions.
Exactly who is and was Lorenzo Lamas?
For those that may not remember Lorenzo Lamas, here's a quick refresher. He's the son of famous actors who first found fame of his own on 80s nighttime soap Falcon Crest. In the 90s, he had another TV hit on his hands with Renegade, and then a few B-list TV shows including Invasion America, Air American and The Immortal. In the 2000s, he enjoyed a couple of years on The Bold and the Beautiful, and since then it's been one-offs and reality TV. In short, Lamas enjoyed a mega-hit, then some moderate hits and then an intense slow-down in work.
Lorenzo Lamas' first bankruptcy filing
In case you didn't already know, there is a mandatory time limit between when you file one bankruptcy and when you can file another. For Chapter 7, as Lamas filed, you must wait eight years after a discharge to file another. The first time he filed was back in 2004 and he listed $433,000 in assets and $616,000 in liabilities.
He had no home listed, two expensive vehicles that he was upside down on, $145,000 in credit card debt, $35,000 in personal loans (one to a relative, one to another party), bills owed to a plastic surgeon, a minor amount in back taxes and some lavish expenses like private plane flight time and lessons. His main asset was $215,000 in a profit sharing plan that was exempt because it was an ERISA plan.
At that time, he was netting $11,000 each month in income but was paying more than half of that out in alimony and child support and had $1,400 a month in vehicle payments and some expensive hobbies. His gross earnings for the year were $264k and this sounds good, but if you're spending beyond your means, this won't go far. His credit card debt alone was more than 55% of his gross and more than 100% of his net.
Lorenzo Lamas' second bankruptcy filing
Lamas got a discharge on all of his unsecured debts in 2004 and this should have been a warning sign that his spending was out of control. But fast forward to 2013 and Lamas was deeper in debt with fewer assets and his financial picture was much grimmer. When he filed Chapter 7 again last year, he had just $9,100 in assets which are made of furniture, clothing, personal items and less than $500 in his checking account. Also of interest is that he filed on his own without an attorney, which is never a wise move.
At the time of filing, he had no income of his own and his wife is the breadwinner with a modest $36k annual salary, which does not go far in LA. He listed $322,000 in debts of which the bulk consists of $285k in taxes, mostly to the IRS, but some also owed to the state of California. He owed $19,200 in child support and has more than $7,000 in monthly expenses. Plus that entire $215k nest egg of exempt funds he had seems to be entirely gone.
So how did this 80s hunk go from all that flash to absolutely no cash? From our perspective it looks like he developed some extravagant interests while he was making big bucks, like costly cars, private flying lessons (maybe even a private plane) and some crazy credit card habits. Add to that the fact that he's had four wives and six kids. Each divorce eats up assets and three of them can take a huge toll. Child support isn't cheap either – particularly when you're earning good money at the time the support numbers are set.
What can we learn from this?
We cover celebrity bankruptcies here in our blog because they're interesting, and also because they do relate to our lives. Celebrities make the same money mistakes that many of our clients make – just on a grander scale. In the case of Lamas, he was clearly living beyond his means and was making some iffy choices in his personal life that impacted his finances.
Most of our clients suffer some sort of major life event that impacts their finances. For some it's job loss, for others, divorce. For some, as in Lamas' case, it's a combination of both. Pile a few questionable spending decisions onto that and you've got a real financial pickle in the making.
If you've similarly suffered some financial setbacks and can't dig yourself out, filing a North Carolina bankruptcy may be your best bet. Contact the law offices of John T Orcutt for a free consultation today.
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