As numerous media outlets reported earlier this month, U.S. Bankruptcy Judge Frank J. Santoro (U.S. Bankruptcy Court for the Eastern District of Virginia) recently rejected suspended NFL star Michael Vick’s Chapter 11 plan, and ordered his attorneys to prepare a new one. Under the rejected plan, Vick would have repaid his creditors and emerged from bankruptcy. However, the plan called for Vick to come up with $750,000 to $1 million in "good, hard cash" to be paid to creditors on the day it would go into effect. The court saw no evidence that Vick could come up with that much money. It has been reported that Vick has about $210,000.00 but owes approximately $ 4.7 million to various creditors.
The plan was largely based upon the assumption that Vick - who is still incarcerated pursuant to a 2007 plea deal arising out of dog fighting charges - would be reinstated into the NFL this fall. Vick’s lawyers also said he has agreed to a television documentary deal that will pay him $600,000. However, his only guaranteed income is a $10-an-hour construction job. The rejected plan called for Vick to keep two houses and three cars; Judge Santoro suggested that Vick and his attorneys to consider liquidating these assets under a revised plan. Judge Santoro ordered a hearing on the status of Vick’s next bankruptcy plan for April 28.
It is important to note that Vick’s ability to repay his creditors is an issue because he has filed under Chapter 11. Chapter 11 is reorganization, as opposed to liquidation. 11 U.S.C. § 1107. Debtors may emerge from a Chapter 11 bankruptcy pursuant to the plan. 11 U.S.C. §§ 1121-1129. The debtor’s business may continue to operate during a Chapter 11 bankruptcy. 11 U.S.C. § 1108. Although Chapter 11 bankruptcies typically involve a corporation or partnership, individuals may file under this chapter as well in certain circumstances. However, the vast majority of individual filers end up applying for bankruptcy under either Chapter 7 or Chapter 13. Vick’s case is unusual because of his high earning potential if he is in fact reinstated into the NFL and can regain his All-Pro status.
- Drew Broaddus