When times are good, it's easy to forget that things could ever go wrong-just look at what happened to many people who invested in the once-booming housing market. After buying homes at artificially inflated prices, they had to face foreclosure or sell the homes for a loss when the housing bubble burst.
The same can happen to professional athletes when they stop playing-and receiving big fat professional-athlete paychecks. The latest riches-to-rags story is that of Jason Caffey, a former NBA star who played with the Chicago Bulls, the Golden State Warriors, and the Milwaukee Bucks until his retirement five years ago.
Caffey, 34, recently filed for bankruptcy, according to the Alabama Press-Register. Apparently, child support payments for Caffey's eight children ,and their seven mothers, have gotten to be more than the ex-pro can handle.
Twice this year, Caffey was reportedly in legal trouble because of missed child support payments: a judge issued a warrant for his arrest in Georgia, and in Alabama, he actually spent time in jail. According to sources, Caffey hasn't made child support payments since May of 2005.
Child support payments are among the non-dischargeable debts in bankruptcy filings, meaning that Caffey will eventually have to pay the mothers of his children the money he owes them. But, because of the automatic stay feature in bankruptcy filings, all creditors (including the mothers) are forced to stop their collection efforts while the bankruptcy is in progress.
Reports indicate that the lawyers of many of the women to whom Caffey owes money welcome his bankruptcy filing. Because some of his other debts will be excused, Caffey will be able to dedicate more of his resources to child support payments.
So how exactly does someone who signed a contract for $35 million not long ago find himself filing for bankruptcy?
That's a good question. First, sources say, Caffey didn't receive the full $35 million because his career ended three years before his contract was finished. Then, of course, there's taxes, and Caffey's wife got about half of his assets in their divorce. But still. Thirty-five million?
Caffey's lawyer allegedly claims that the alimony and child support payments he currently owes are unreasonable for someone no longer making a professional athlete's income. According to sources, Caffey's monthly income from his various investments totals about $11,500. Of that, $7,000-more than half-is supposed to go to child support.
And Caffey apparently invested about $2.5 million in business ventures, including a restaurant, which he says will benefit his children in years to come.
Whether or not Caffey could have managed his wealth better to prevent having to file for bankruptcy is irrelevant. His example teaches us one thing: you can't always predict who will need to file for bankruptcy. And sometimes, filing bankruptcy is the best way to manage what's left of your finances.