It was last summer when I began following the bankruptcy case filed by Michael Vick and reporting on it in these Indiana bankruptcy blogs. I was careful to explain that almost all the tens of thousands of bankruptcies I’ve handled involved everyday working people, rather than celebrities. Needless to say, confidentiality would never allow my writing about any of my own cases. Because celebrity cases are in the news, though, I find I’m able to use those as a teaching tool to help readers better understand the way the bankruptcy process works.
In August of last year, when attorneys for former Falcons quarterback Vick filed Chapter 11 bankruiptcy in Virginia, Vick himself was actually serving time in a Kansas penitentiary for funding dogfighting. The top seven creditors listed in Vick’s bankruptcy were owed almost thirteen million dollars. This information was detailed at the Creditors’ Meeting, which is one of the initial phases of a bankruptcy case. The reason this meeting is so important is that, while bankruptcy’s goal is to help individuals who’ve fallen upon hard times, creditors who lent money to that person in good faith, need to be treated as fairly and equitably as possible.
One of the steps in many bankruptcies is an auction of assets. The purpose of the auction is to convert the debtor’s assets into cash that can be used to pay creditors. In Michael Vick’s case, one of the biggest assets that was put up for auction is the eight-bedroom, eleven-bath luxury home he owns in suburban Atlanta. The problem is that, in light of the economic downturn, there were no bidders. The bankruptcy process has been, at least temporarily, derailed, and the bankruptcy court will now need to decide what the next step will be.
No information was available about any outstanding mortgage balances on the Vick house, but, if the new bankruptcy law passes in the senate and is signed into law by the president, bankruptcy judges will have the power to rewrite mortgages. It remains to be seen, even if the mortgage “cramdown” legislation becomes law, how that might affect Michael Vick, since he has not filed a Chapter 13 bankruptcy, but a Chapter 11. Again, though, this famous case illustrated the point that bankruptcy is never a one-time event, but a process with many steps.