After paying over 17 million dollars to
his creditors, Michael Vick’s Chapter 11
bankruptcy case is finally over.
ESPN spoke with Joseph Luzinski, a senior vice president at Development Specialists Inc., a management consultation firm and the liquidating trustee in Vick’s bankruptcy. He praised Vick for his commitment to paying off the creditors. “Paying 99 cents on the dollar, which he did, is remarkable,” Luzinski said. “It happens in, maybe, one out of 100 cases.”
Well, a person is not usually liquidated in a any chapter bankruptcy case.
In individual Chapter 11 cases, you are your own trustee, unless a court appoints one.
This is usually done only where the creditors do not trust the debtor, the person filing the bankruptcy case.
A corporation, contrary to an individual can be liquidated. Many corporate Chapter 11 cases are filed so that the corporation can control its liquidation and get maximum value for its assets.
I have filed these myself, where everyone wanted the restaurants to stay open, as they fetch a lot more money as a going concern than shuttered buildings.
Hard to find details on his case, but, some things are known.
Why Would A Consumer/Individual File Chapter 11 Bankruptcy?
Chapter 13 is a payment plan bankruptcy, that most individuals file, but, it has a debt limit.
If you owe more than a specified amount of secured debt, or unsecured debt, you are ineligible for Chapter 13 bankruptcy relief.
Vick owed more than 17 million dollars, so, WAY over that limit.
Why Not Chapter 7 Bankruptcy?
Chapter 7 bankruptcy wipes out debts. You pay nothing.
After the infamous dog-fighting scandal in 2008 derailed his pro football career and ended his endorsement deals, Vick was forced to file bankruptcy. Once he was reinstated in 2009, he reportedly made $50 million from the NFL before officially retiring on February 3, 2017.
To stay in a Chapter 7 bankruptcy, your income, after living expenses, has to be insufficient to pay creditors anything. Mr. Vick had a problem in that area.
But, if he has to pay anyway, what is the advantage of filing Chapter 11 bankruptcy?
Well, you can go longer than the 5 year maximum for Chapter 13 bankruptcy plans.
And, you stay in control of your finances. No foreclosures, garnishments, or repossessions.
And you do not have to pay 100% of the debts.
That depends on your income after expenses, and the value of your assets compared to the amount of your debts.
Chapter 11 can be a useful tool to resolve some tough issues.