Boston Bankruptcy Lawyer Blog

The Patriots don't play the Philadelphia Eagles until Thanksgiving Sunday ---November 27. The question is not who will win. We here in Massachusetts know the New England Patriots will be ready for them come Week 12. The question, for those of us who follow Massachusetts bankruptcy law, is how can Philadelphia quarterback Massachusetts bankruptcy court: he overspent. Couldn't that salary get him out? Sure, but, like many folks who file for bankruptcy protection in Massachusetts, an unforeseen circumstance arose. No, most folks that file in Massachusetts were not convicted of cruelty to animal and illegal betting, and sent to jail like Vick. But many of our clients have an unexpected event which triggers a financial demise. Those include loss of income, a divorce, unexpected expenses associated with a spouse, child or family member. In any event, there becomes no way to pay the household expenses and pay on the debt.

Vick is not a client, nor a contributor to our bankruptcy blog, http://www.bostonbankruptcylawyerblog.com/, so we can only write about what we know. With Vick, some of the expenses seem outrageous. He was buying his friends new cars, his mother an 8,000 square foot house, and had a host of hangers-on that he housed, fed and paid. In 2005, Forbes estimated that he was grossing $37.5 million per year as the quarterback for the Atlanta Falcons; this was salary plus endorsements. He had contracts with Nike, Coke and Kraft foods.

Vick served 21 months in jail. Of course, he was also suspended from football. In addition to the cruelty to animals' convictions, the National Football League held a special aberrance to gambling. When the Atlanta Falcons released him and demanded $20 million for reimbursement for his violations of the league's "conduct" policy, he filed for arbitration and lost: he had used his signing bonus partially to fund the illegal activities.

Without a salary, trying to maintain six homes, maintain 10 vehicles, pay his lawyers and other professionals was difficult. The bankruptcy pleadings indicate he was spending $30,000 per month to maintain his various family members, ex-girlfriend and their child, fiancée and their children, friends and associates. He filed for bankruptcy protection in July 2008. According to summaries of the bankruptcy filings, Michael Vick had $16.1 million in assets and over $20 million in debt. He was in litigation with his former agent. He lost monies to a corrupt financial "advisor" named Mary Wong, who ended up in her own personal bankruptcy and in litigation with numerous of Vick's creditors.

The debts included monies owed to the Atlanta Falcons for the aforementioned breach of contract, a loan to the Royal bank of Canada, along with various secured and unsecured debts. Another creditor was Joel Enterprises, a company that had a contract with Vick which Vick was found to have breached weeks after he left college for the NFL.

After his incarceration in federal prison in Levenworth, Kansas, he signed a one year contract for $1.6 million with the Eagles, in August 2009. That was two years ago. There was a better contract in 2010. Now it's $100 million for six years, one of the top contracts in all of the NFL!

Vick's Chapter 11 plan was to pay off debts at 80 cents on the dollar; a significant factor of the plan was that over $750,000 and up to $2.5 million, creditors get 25 percent; over $2.5 million, creditors get, 30 percent; and then 40% if he exceeds $10 million threshold. The plan was ultimately approved in August 2009.

It's not just Michael Vick who finds himself in financial trouble. Other NLF players have been victim to financial fraud, or at least severe overreaching. There are estimates that between 1999 and 2002 78 NFL "millionaires" players lost over $42 million in acts of fraud perpetrated by financial advisers.

Even if you are not an elite NFL athlete with a new contract that bumps up against Tom Brady's, you may simply need some solid legal advice regarding filing for bankruptcy in Massachusetts. That's where over 25 years of personal attention to our clients will be focused on you. Call us!

A Boston bankruptcy lawyer will not ask you your age when offering advice for a Massachusetts bankruptcy. It's irrelevant. So long as you are of legal age and your income and assets qualify under the "new" 2005 bankruptcy law, we can file a bankruptcy petition and schedules for you. However, it is concerning that the rate of personal bankruptcy filings are up for senior citizens. Our Boston Bankruptcy Lawyer Blog at http://www.bostonbankruptcylawyerblog.com/ set out to see what the research is showing.

In a study published by the University of Michigan Law School, Professor John Pottow shows some hard facts which prove that "[b]ankruptcy filers are getting older." For example, in 1991, the median age of a person filing for personal bankruptcy was 36.5. By 2001 the median age was 40.6. In 2007, the age was 43. According to the report, the number of elderly personal bankruptcy filers more than doubled from 1991 to 2001 - from 2.1% to 4.5%. The number increased to 7% by 2007. The numbers are taken from the Consumer Bankruptcy Project, in which the professor is a collaborator.

In fact, some of Professor Pottow's statistics are quite alarming. In comparing the change in filings by age group between 1991 and 2007, his statistics are that in the 18-24 year old age group, the number is down 51.%%; in the 25-34 year old age group, the number is down 40.3%, the 35-44 year old age group, the number is down 8.2%; however, in each age group thereafter, the numbers go up dramatically. The 55-64 year old age group had a relative percentage change of 150.8%; the 65-74 year old age group had a 177.8% increase in personal bankruptcy filings; and, the 75 or older group had a 566.7 relative percentage change in personal bankruptcy filings during those years.

Professor Pottow's research aimed at determining why elderly bankruptcy filers filed. His surveys showed that credit card debt was the primary reason. And, more particularly, they identified fees and increased interest rates as the cause for filing. In fact 66.6% of those responding to the survey identified credit cards as the cause of their financial situation necessitating filing for bankruptcy. The study compared elderly United States citizens with those of other countries, and found a correlation.

Interestingly, the study looked beyond just what they said, but compared what they said to the actual debts recorded on the Federal Bankruptcy Petitions and Schedules. Older bankruptcy filers had almost twice the credit card debt as younger bankruptcy filers. The "definite credit card debt" among those under 65 was $13,615 while the "definite credit card debt" for those over 65 was $22,562. The study could not determine the "why" but does offer lots of rational speculation and cites ongoing studies for determining the cause of the underlying differences. Among those reasons are incompetence regarding handling financial affairs, elderly are less comfortable asking friends and family to borrow money and helping others with their financial situations.

Another factor, albeit unfortunate, is that the data shows that the older debtors are poorer than other bankruptcy filers. In fact, they are "disproportionately poorer than the younger filers." This data looked at monthly income, unsecured debt, unsecured debt-to-income ratio. Many had retired but then returned to work. Alarmingly, 9.7% of those responding to the survey reported that they had gone without food prior to filing bankruptcy.

Professor Pottow finds "one of the most sobering finding" is with the baby boomers coming of elder age, this is an "ominous portent of what may await" them. He calls it the "canary in the coal mine." He points out that while medical bankruptcies are a problem, there is a growing and dangerous problem with credit card bankruptcies for the elderly.

While he does not pose specific solutions, he raises lots of ideas worth considering: relaxing restrictions on discharging credit card debt, reducing medical bankruptcies within the health care system which would reduce credit card bankruptcies, and offering age specific relief regarding tax rates.

The largest municipal bankruptcy is happening just outside of Massachusetts. Central Falls, Rhode Island, a city of 18,000, filed for Chapter 9 bankruptcy protection in Federal Bankruptcy Court. The filing was in the Massachusetts Bankruptcy Court, in Boston. The alleged culprit is the city's pension plan: they promised much to city retirees and made no plan to pay for it. The city's annual budget is just over $16 million, and the deficit is over $5 million.

The state of Rhode Island appointed a receiver, Robert Flanders, a bankruptcy lawyer from the law firm Hinckley Allen Snyder. A bankruptcy lawyer in a Chapter 9 case will submit a reorganization plan within 30 days. It is expected that the plan for Central Falls will involve cutting retiree benefits by 50%, which would save half of the $5 million deficit.

This is not news to the Central Falls city workers and retirees. They have been meeting and voting on various plans proposed by Mr. Flanders. When 141 retirees could not agree in a vote last week, the state appointed receiver was left with no option but to file for bankruptcy in Massachusetts court. As you can imagine, there is a lot of discontent, allegations of fraud and overreaching, and questionable acts.

The city has hired Kenneth Klee, of Klee, Tuchin, Bogdanoff & Stern. Mr. Klee worked on the Orange County bankruptcy in 1994. He was instrumental in rewriting the municipal bankruptcy law, back in 1975, when New York City was on the verge of bankruptcy. The significant portion of the law that he wrote was that the bankruptcy court could cancel union contracts with municipalities. While the city is fortunate to have such expertise, the expense of yet another lawyer, and yet another process, is not lost on taxpayers.

Jefferson County, Alabama, is having a similar bankruptcy issue. A sewer system that violated the Clean Water Act in 1996 was supposed to cost $1 billion to fix. The result was $3.2 billion in sewer bonds which now are, essentially, in default. In the event that they eventually file for bankruptcy protection, it would be the largest municipal bankruptcy since Orange County, California filed in 1994. Residents of Jefferson County pay $63 on average per month for use of the sewer system, apparently one of the highest rates in the country. The mismanagement includes JP Morgan which was an underwriter for the bonds, which paid $647 in penalties for bribing elected officials to secure the business.

Chapter 9 bankruptcies originated in the 1930s and there have been about seven per year since then. This is obviously a very low number, considering the number of cities in the United States. Further, many of the Chapter 9 bankruptcies are not municipalities at all, but sewer works and other municipal or public utilities. Already this year, six have been filed in the United States.

Does this mean there will be some in Massachusetts? We have no way of knowing. There do not seem to be any on the radar screens, or in the financial news. However, we will endeavor to keep our faithful followers appraised if any Massachusetts municipal bankruptcies emerge.