Vick bankruptcy plan has NFL in mind
NEWPORT NEWS, Va. -- Michael Vick and his team of bankruptcy lawyers were in court in Newport News, Va., on Thursday, asking a judge to approve a complex plan for Vick's financial future. Relying on the legal procedures of Chapter 11 of the U.S. Bankruptcy Act rather than Chapter 7, they offered testimony from an accountant and from Vick's agent. Their plan and their witnesses raise legal questions. Here are some of the questions and their answers:
Why doesn't Vick simply declare a Chapter 7 bankruptcy, rid himself of his debts and move on?
The Chapter 11 plan for Vick's future is part of his attempt to return to the NFL. Vick and his lawyers are trying to show U.S. Bankruptcy Judge Frank Santoro that Vick wants to be a good citizen and do the right thing. So instead of walking away from nearly $20 million in debts -- which he could do, to a large extent, if he filed under Chapter 7 -- he is offering to pay portions of those debts from future earnings. The plan will be part of Vick's presentation to NFL commissioner Roger Goodell when he formally seeks reinstatement. He will tell Goodell that instead of stiffing his creditors, he has promised to pay them for several years out of his NFL earnings. To show true remorse for his conviction on dogfighting charges, Vick must try to pay for his past; and this plan is the first step in the process.
Can the plan work? Is there any chance Vick will be able to pay some of his debts?
Vick and his lawyers must convince the judge that the plan is feasible and that there is a good chance that Vick will make significant money in the future, will live within his means and will pay the bills in a timely way. It is an enormous undertaking. It requires Vick to pay for two households and begin to pay off massive debts. The first step in the plan is to pay nearly $65,000 in June to avoid foreclosure on a house where Vick will live when he finishes his jail term on July 21. His annual overhead under the plan, according to accountant Ira Spiegel, will be $200,000 per year. Vick must convince Santoro that this scheme will work. Vick is shedding houses, horses, boats and cars he accumulated when he was one of the NFL's highest-paid players. And he has lost money he invested in a wine shop, a car dealership and other businesses.
Where will the money come from?
The plan is based on Vick's returning to football and earning big money. It allows him to keep the first $750,000 he will earn each year, then requires him to pay an increasing percentage of any income above $750,000. If he somehow is able to earn $10 million a year, he will pay $2.3 million to his creditors. He will be required to pay creditors for at least six years, and maybe longer, under the terms of the plan. Without a return to football, the plan would not work.
Vick owes a lot of money to a lot of people. Are they happy with this scheme?
Yes. The vast majority of Vick's creditors are voting to approve the plan. They know they are better off with it than they would be if Vick simply declared bankruptcy (known as a Chapter 7) and walked away. They are hoping that the NFL allows him to return -- and that he succeeds.
What obstacles does Vick face in persuading the judge to approve this plan?
His primary obstacle is a sports marketing agent named Andrew Joel, who is objecting strenuously to Vick's plan. Joel was Vick's first marketing agent and was enraged when Vick tried to fire him. In 2005, long before the dogfighting operation was exposed, Joel sued Vick for $10 million. After a protracted battle, he nailed Vick with a judgment for $4.6 million. Joel wants every nickel of that judgment. He does not want to wait for partial installment payments like the other creditors. In his court papers, Joel says Vick is hiding money, lying about his boats and cars, and lying about his investment losses. His lawyers will want the plan rejected and want their judgment set apart for full payment. Joel isn't expected to testify at the hearing, but his lawyer is in attendance and will question Vick during his testimony Friday.
Will Vick succeed in obtaining the judge's approval of the plan?
Probably. The approval of the creditors is a major victory for Vick. He also has managed to settle with the IRS, with an arrangement to pay back taxes of nearly $700,000. But even more important than the approval of the creditors and the settlement with the IRS will be Vick's testimony Friday. He will try to convince Santoro that he is a changed man. Sitting only a few feet from the judge, Vick will describe the changes he has made in his life and and emphasize his commitments to his family and to the financial plan. It could be emotional testimony. He will face a tough cross-examination from Joel's attorney, Warren Harless, who already has demonstrated considerable courtroom skill. Harless will confront Vick with embarrassing questions about his investments and money that might have disappeared in the days before Vick went to prison. If Vick can maintain his composure and establish his veracity, it will go a long way toward approval of the plan. It is not known when Santoro will issue a ruling.
Lester Munson, a Chicago lawyer and journalist who reports on investigative and legal issues in the sports industry, is a senior writer for ESPN.com.
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