There's been lots of handwringing and gaping mouths since it was "discovered" that a large portion of Michael Vick's new contract of $40 million will go to his bankruptcy estate to pay creditors. While it may seem that the bankruptcy payout is an unfair deal, the reality is that without bankruptcy Michael Vick could face an even harsher financial reality.
Below are a few things that would probably happen if Michael Vick didn't file bankruptcy:
His Creditors Would Liquidate His Assets
Just like less wealthy bankruptcy filers, Michael Vick has been given the opportunity to repay his debts over a period time. He currently owes a reported $19 million to creditors. Last year he made a little over $5 million. Without bankruptcy, his creditors would be allowed to take large chucks of his paycheck with no regard to how it would impact his lifestyle. The IRS alone would have the power to garnish huge chunks of his take-home pay, with other creditors swopping in to take the rest. Secured creditors could come in and repossess his property. While in bankruptcy, they are prohibited from repossessing property as long as Vick is making payments on the loans.
Lawsuits Would Become Everyday
Someone like Vick is protected in bankruptcy because the law prohibits creditors from filing lawsuits. Without bankruptcy Vick would likely suffer a litany of lawsuits from creditors who are eager to sue because they know he has cash and assets. Fighting constant litigation would not only be a drain on Vick's finances it could drain him of the time and energy he needs to play football.