Friday, May 28, 2010

Antoine Walker: Not A Bust, Now Bust

Antoine Walker, a former Boston Celtic, Dallas Maverick, Atlanta Hawk, Miami Heater, and Memphis Grizzly, apparently filed for bankruptcy last week under Chapter 7 of the U.S. Bankruptcy Code. The linked article from the Wall Street Journal does a good job of outlining Walker's financial woes: $12 MM in personal debts but only $4 MM in assets. Yeah, this guy lived a bit too large. He generally lived up to his promise as the #6 pick in the 1996 NBA draft, scoring over 20 PPG for five years and helping the Miami Heat win the 2006 NBA title as their starting small forward. Although he took a lot of foolhardy three-pointers, his biggest disappointment was in his financial prudence.

Under 11 U.S.C. §523 and §727, a Chapter 7 case results, after liquidation of the debtor's estate, in discharge of all the debtor's debts that arose before the bankruptcy petition (with certain exceptions like tax obligations and domestic support obligations). Secured creditors get the value of their collateral, up to the amount of their secured claim, and unsecured creditors get whatever is left over from such collateral and the debtor's other assets. Walker is going to wind up with nothing going forward, other than his income-generating ability, whatever that may be.

What's more, it seems that Walker's biggest real estate liability is a $2.3 MM secured mortgage on a Chicago-area mansion. Illinois allows deficiency judgments (see 735 ILCS §15-1504(f)), which means that even if Walker's mortgage lender foreclosed on his house under ordinary non-bankruptcy procedure, they could still sue him for the difference if the market value of the mansion came in below $2.3 MM, which is likely given recent real estate trends. In Chapter 7, that potential deficiency claim by the bank will be discharged along with most of his other personal debts. This would not be the case in a Chapter 13 filing.

Under 11 U.S.C. §707(b), Walker's Chapter 7 filing might be deemed presumptively abusive and thus dismissed, or converted to Chapters 11/13, if his monthly net income (after deducting reasonable living expenses, mortgage payments, and domestic support obligations), multiplied by 60, exceeds $10,000. In other words, if his monthly net income exceeds $167, his case may be deemed abusive, unless he can show "special circumstances" such as military service obligation or a serious medical condition. It is hard to believe that Walker cannot bank a couple hundred bucks per month, but I suppose that is what you get when you live like Antoine Walker. In the WSJ article above, he claims to have zero income.

1 comment:

Roslyn Rosecrans said...

You have to feel sad about these people, who used to be well-known and looked up to by young people as role models, but are now fighting for survival. Personally, I love the way this guy played, especially the trademark wiggle! But his lavish spending took its toll on him, which put him in the situation he is facing right now. It's never too late, though, for a change.