A prominent professional football star filed for Chapter 11 bankruptcy with the hope of saving some of his assets from financial disaster. The athlete was charged with state crimes and knew that the fines he incurred and the expense of a legal defense team would drain his resources. The football player determined that he had assets and liabilities greater than $10 million and listed some 30 creditors in his bankruptcy filing. One of the creditors was the team he had played for before he was accused of criminal misconduct.
The star athlete determined that filing Chapter 11 bankruptcy would allow him to arrange for repayment to his creditors and would allow him to keep his property. His bankruptcy attorney indicated that the filing of bankruptcy would also affect how much money he would earn in his future football career.
Bankruptcy Law Changes
Recent changes to the federal bankruptcy laws limit the number of people who are eligible to file under Chapter 7 and increase the number of people who file under Chapter 13. Chapter 7 bankruptcy rules allow the filer to give all his assets to creditors and cancel many debts to give him a new beginning to his financial life. Chapter 13 bankruptcy rules allow the filer to be placed on a multi-year repayment plan and to keep most of his assets. To determine whether an individual can file under Chapter 7 bankruptcy, his income is put to two tests:
• The income is placed into a formula that discounts monthly payments for things like rent and food. This is to determine whether the individual can afford to pay one-fourth of his unsecured debt.
• The income is compare with the median income in the state in which the filer lives.
Those who have an income greater than the state’s median income and who can afford to pay one-fourth of their unsecured credit card debts are not allowed to file for bankruptcy under Chapter 7 but may file under Chapter 13.
Under the new bankruptcy laws, those filing for bankruptcy are required to meet with a credit counselor who is approved to evaluate and discuss credit issues in the state in which the filer lives. This session must last at least 90 minutes and must take place during the six months prior to filing for bankruptcy.
In addition, the new bankruptcy rules state that attorneys representing filers are subject to fines if the information about a client is determined to be inaccurate. This forces attorneys to provide better bankruptcy representation for consumers.