Many in California have faced the decision to file for bankruptcy due to the economic challenges that have appeared during the recent recession. Job loss, falling incomes and reduced home values have been just a few of the issues that have caused many in our state to seek the protections of a Chapter 7 bankruptcy. Now, one Coach of a large university has filed because he fund that he could not repay his debts with his current income.
The football coach filed for Chapter 7 bankruptcy protections earlier this fall. In his filing, he reported that he had $40 million in debts to various creditors. With that high amount of debt, his assets of $1.3 million were inadequate. In addition, he reports that $1.2 million of his assets are tied up in retirement accounts.
The Coach has asserted to the bankruptcy trustee that he has earned approximately $134,000 thus far this year. However, this income may be the subject of some debate during the Chapter 7 process. This is because the Coach is expected to be paid a total of $850,000 this year for his services. It appears that he may have deferred some of his earning until after the filing to avoid having to use the money to pay creditors.
Like a Chapter 7 bankruptcy in California, the coach in this case was expected to report all of his income to the trustee. If he is found to have tried to avoid that requirement, he may face creditors that could ask the bankruptcy court to require additional payment from the coach. While it is not immediately clear how this particular issue will play out in court, it does raise considerations for other contract workers who are thinking about filing for bankruptcy to keep in mind.
Source: USATODAY.com, "Arkansas coach John L. Smith deferred bulk of pay," Brent Schrotenboer, Oct. 7, 2012