NFL player Michael Vick’s bankruptcy has become fodder for many sports pundits and even some financial talking heads. But what many observers are missing about the infamous Vick, is that despite his financial and legal troubles, his Chapter 11 bankruptcy filing offers on very important gem of wisdom for high income earners considering bankruptcy.
Vick Bankruptcy Lesson #1 – Filing bankruptcy is not the end of the world. Michael Vick went to jail for dog fighting and has had to sell some of his assets not protected by bankruptcy exemptions; but he is still living well.
According to the ESPN report, he can spend $3,500 for rent in Philadelphia. He is also obliged to pay a little more than $3,700 per month on the mortgage for the only remaining home that he owns in Hampton, VA, where his fiancé lives with the couple’s two children.
The children go to a private school. Budget allows Vick to pay a little more than $1,300 per month for that. And Vick can only give his mother $2,500 per month.
On the other side, the budget provides for Vick’s agent, Joel Seagal. The ESPN report says Seagal gets $32,500 this year, another $104,000 this year and then $160,000 each year through 2015 for a total of nearly $800,000.
That’s a far cry from living on a pauper’s wage and being forced to relinquish the lifestyle he had become accustomed to. Bankruptcy is NOT designed to “punish” the debtor by making them suffer; it is designed to help the debtor efficiently repay creditors in a fair and equitable manner that does not destroy all of the debtor’s most important assets. For example, sending his kids to a private school is a reasonable expectation of someone earning this income; but that does not mean that it has to be at the expense of the creditors. By limiting the amount of money that Vick can pay for private education, the bankruptcy trustee has created a win-win situation for both Michael Vick and his creditors.