September 7, 2011
By: Brenna Lemieux
NFL star Michael Vick's new six-year, $100 million contract with the Philadelphia Eagles is good news for football fans, the quarterback, and Vick's bankruptcy creditors.
Vick filed for Chapter 11 bankruptcy from jail in 2008. According to the Wall Street Journal, Vick's Chapter 11 plan included a trust for repaying his creditors. Future earnings would go into that trust at a rate of 10 percent of the first $750,000 and 40 percent for earnings in excess of $10 million.
While a full payout of the $100 million contract would likely mean complete repayment for those creditors, the quarterback will only earn that amount if he meets certain conditions. The contract reportedly includes a guaranteed $40 million. Still, considering that creditors agreed to the repayment trust plan in 2009, when Vick was still incarcerated, the news of his comeback is far better for them than it could have been.
At the time of his Chapter 11 filing, Vick reportedly owed $19 million to creditors, which exceeded the limits allowed in Chapter 13 reorganization. While Chapter 11 is available to individuals, most opt for the less-complicated and less-expensive Chapter 13 when reorganizing debts in bankruptcy.
The bankruptcy court's oversight of Vick's budget expires in 2015. At that point, he should have been able to repay $12 million in debt by adhering to the repayment plan and budget schedules outlined by the court.
And the stakes are higher for Vick all around: his allotted budget expenses are reportedly greater than those for average bankruptcy filers. His monthly rent allowance is, according to BusinessInsider.com, $3,500 and his monthly allotment for car payments is $472. All in all, about two-thirds of Vick’s new contract will go to bankruptcy creditors.
Vick's bankruptcy trouble began when he was convicted on dog fighting charges and sentenced to prison; though he was playing for Atlanta Falcons on a 10-year, $130 million contract, the conviction required him to forfeit his playing agreement. Of his $40 million guaranteed salary, Vick's post-bankruptcy earnings will be closer to $12 or $13 million.