By Ryan C. Wood
On January 17, 2014, ex-football play and celebrity Vince Young filed for bankruptcy protection under Chapter 11 of Title 11. Mr. Young filed in the Bankruptcy Court for the Southern District of California, Bankruptcy Case number 14-30400. Individuals with secured debts over $1,149,525.00 or unsecured debts exceeding $383,175.00 can reorganize their debts under Chapter 11 of the Bankruptcy Code. It is a much more expensive and complicated process then reorganizing debts under Chapter 13 of the Bankruptcy Code. The fact that Mr. Young filed for Chapter 11 is actually a very good sign regarding his financial situation. Time will tell if Mr. Young can confirm a plan of reorganization. Chapter 13 is reserved for individuals with debts of less than the debt limitations listed above. Chapter 13 is a much simpler, cheaper and streamlined process than reorganizing under Chapter 11.
As of right now Mr. Young’s bankruptcy lawyer has only filed the basic documents necessary to obtain an order for relief and begin the bankruptcy process. It is sometimes called a skeleton petition. There are no schedules of assets, income or expenses filed with the bankruptcy petition. The only indication of Mr. Young’s assets or debts are the boxes checked on the voluntary petition indication the number of creditors (1-49), amount of assets of Mr. Young ($500,001 – $1 million) and debts ($1,000,001 – $10 million. According to these ranges Mr. Young’s debts could far exceed his assets, but what we do not know from anything filed yet is Mr. Young’s income. For someone signed a contract for $58 million contract, with $26 million guaranteed, it is sad to see his asset range of only $500,001 to $1 million. It is early in the bankruptcy case and very little is known. The list of creditors sheds a little more light on the case though. The creditor list provides 20 creditors. A few of those owed money are America’s Servicing Company (mortgage), Applied Visuals, BMW Financial, Brian D. Jewab, David A. Chaumette, Exotic Diamonds, Jeff Heard, Major L. Adams II, Peoples Financial Services, Pro Player Funding LLC, Ronnie T. Peoples and Wells Fargo.
On the upside, there are many possible ways to successfully reorganize debts whether secured or unsecured. Hopefully Mr. Young has a decent income still and assets that will provide his bankruptcy attorney with options to help successfully reorganize Mr. Young’s debts.
One of the problems with reorganizing debts in a Chapter 11 case is the administrative expenses charged. This is includes the fees and costs for the bankruptcy filer’s attorney, the attorney for the unsecured creditors’ committee counsel (if any), accountants and other professionals that have a right to file fee applications for approval of their fees from the assets of the bankruptcy estate. Many creditors receive little to nothing after professionals incur high fees in administering the bankruptcy case. A bankruptcy estate of $2 million dollars can quickly become only $1.5 million or less after professional fees are approved and paid. That is a 25% decrease in assets available for the benefit of creditors. Please continue to check in on our Bay Area Bankruptcy Buzz blog for more information about Mr. Young’s bankruptcy case. We will be providing further information as the case unfolds.