People who choose a Chapter 7 bankruptcy usually intend to obtain a complete discharge of all obligations. Those who choose Chapter 11 have some intention to repay at least some of their debts. Former New York Jets quarterback Michael Vick owed slightly more than $17 million when he filed his bankruptcy petition in 2008, but he chose Chapter 11 because he was reluctant to “stiff people who never stiffed [him].”
Vick served 548 days in prison for taking part in an illegal dog fighting ring. When he emerged from prison, he had accumulated debts of $17.4 million. Had he chosen to file a bankruptcy petition under Chapter 7 (assuming he would have been able to satisfy the “means test” for Chapter 7 eligibility), all of his obligations may have been discharged. Instead, he chose Chapter 11 and agreed to live on a restricted budget so that he could pay his creditors. Vick earned nearly $50 million during the final five years of his active football career. Since his retirement, he has been employed by Fox Sports as a studio analyst for its NFL broadcasts.
Vick’s creditors were nearly made whole. He paid $17.4 million to satisfy debts of $17.6 million. The senior vice president of the firm that served as Vick’s liquidating trustee said that Vick’s feat of paying 99 cents on the dollar was “remarkable.” He estimated that such high repayments happen in “maybe, one out of 100 cases.”
Vick was of course aided by his ability to earn large amounts of money as a professional athlete. Nevertheless, he was forced to save a significant portion of his after-tax income to repay his creditors. This case shows both the power of chapter 11 and a debtor who is dedicated to using the bankruptcy code to buy time to repay his creditors.
Source: ESPN, “Michael Vick reimburses creditors in rare debt payback,” Darren Rovell, Nov. 17, 2017