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Do High Income Earners File for Bankruptcy?

Recently, there was an interesting story in the Las Vegas Review-Journal discussing former NFL players who have had to file for bankruptcy because of bad investments. Photo of legal books

The newspaper reported that a research paper by the National Bureau of Economic Research found that nearly 16 percent of NFL players drafted between 1996 and 2003 declared bankruptcy within 12 years of retirement, which is something outsiders may not be able to understand because the average player makes $1.9 million per year.

One expert said that although the players earn a significant amounts of money during their playing careers, their earning periods are extremely short, as many are forced into retirement due to a variety of reasons at a young age.

Combined with a lack of knowledge about personal finance, the players often end up blowing through money or making bad investments. Experts the Review-Journal spoke to said that many high-income earners, not just football players, make financial mistakes like relying on friends and family members to make investments, while not having a basic understanding of financial literacy.

Why Would a High-Income Earner File for Bankruptcy?

Debt is a burden that any American can face, brought on by job loss, taxes, divorce, death or legal difficulties. This is why bankruptcy is an important tool for everyone, including high-income earners.

In any case, through a personal bankruptcy, a debtor can eliminate or greatly reduce outstanding debts. In cases involving high-income earners, the amount of money and debt a person has plays a role in which type of bankruptcy he or she files. In some cases, just as a business with significant debts would be able to, a Chapter 11 filing is an option. This allows a high-income earner to eliminate substantial debts through a repayment plan agreed upon by the parties involved.

Additionally, through a Chapter 13 bankruptcy, debtors with a specific income can enter into a payment plan with creditors, allowing them to keep certain assets including properties and vehicles. Keep in mind, through any bankruptcy filing, an automatic stay goes into effect, meaning collectors cannot take certain actions against you.

If you are drowning in debt, regardless of your income, you will need experienced legal counsel if you are thinking about filing for bankruptcy. Our firm can guide you through this process and help you recover financially.

Shuster Law Firm PLLC – Lewisville Bankruptcy Attorneys

Source: http://www.reviewjournal.com/business/money/what-familes-can-learn-the-nfl-bankruptcy-crisis