The 3 Largest Bankruptcies in U.S. History
Many people were affected by the recession. People lost their house, car, life savings, and more which led to bankruptcy. However, bankruptcy was not limited to individuals and families. Some of largest bankruptcies in history were actually filed by companies.
3 – WorldCom
Fueled by a hungry CEO, Bernie Ebbers, WorldCom managed acquisition after acquisition in the 1990’s. The worlds # 2 long distance phone company and # 1 internet network had to keep its stock price up to pay for many of these acquisitions. In one of the largest corporate frauds in history, this company took “cooking the books” to a whole new level. To elevate the value of the company, they recorded over $9 billion in fraudulent transactions.
Before declaring bankruptcy under chapter 11, WorldCom had assets worth $103.9 billion.
2 – Washington Mutual
Everyone knows the housing market in California is well…challenging. No one knows that better than Washington Mutual. When housing values dropped more than 9 percent (equal to the drop during the great depression) in 2007, Washington Mutual found itself holding mortgages (mostly in California) worth far more than the asset they financed. They couldn’t sell the mortgages to other companies which led to a net loss of $67 billion in 2007. The final dagger for Washington Mutual was the loss of customer deposits. When Lehman Brothers went down, people everywhere started pulling all of their money out of investments and banks.
Prior to declaring bankruptcy, Washington Mutual had $329.7 billion in assets.
1 – Lehman Brothers
You may be familiar with the term “subprime mortgage”. These are mortgages that were given to unqualified people without the necessary documentation. If this sounds like a bad idea, that is because it is. Just ask Lehman Brothers. This firm acquired 5 companies that were underwriting subprime mortgages during the housing boom in 2004 and 2005. By 2006, they controlled $146 billion in mortgages which is wonderful when everyone is paying on-time. Unfortunately, as we all know, that became a difficult proposition around 2008.
With a portfolio massively leveraged in mortgage loans and the stock market beginning to faulter, Lehman Brothers looked abroad for investors. They were close to a deal with Korea Development bank. When that deal fell through, stock holder confidence fell to an all-time low which marked the end.
Lehman Brothers filed for bankruptcy with $639 billion in assets and $619 billion in debt.
The Moral of the Story
No matter how much money you have, things can happen that leave you upside down in debt. Regardless of fault, you can protect yourself. If you are defaulting on loans and getting phone calls from debt collectors, you need help. Elias Dsouza of Dsouza and Strachan Lawgroup Group has the skills and experience to give you that help. Contact Elias to get started on the right path today.