Over the decades, bankruptcy has gone from being a shameful, four-letter word to being accepted as a needed emergency escape hatch. Indeed, legislation has been proposed to lighten the burden of bankruptcy and make debt, like student debt, more easily dischargeable. Even celebrities are more frequently availing themselves of the process, like one former Indianapolis Colts player did recently.
The new bankruptcy filing
Gary Brackett, the former NFL linebacker and restaurant owner of several restaurants filed for Chapter 7 bankruptcy protection last Friday. He filed in the U.S. Bankruptcy Court in the Southern District of Indiana, and he listed almost $6 million in debts and liabilities and only about $2 million in assets.
A common occurrence
Rich sports stars are famous for going bankrupt. According to the National Bureau of Economic Research, nearly 16% of NFL players file for bankruptcy by their twelfth year of retirement. They examined NFL players drafted between 1996 and 2003.
Not the usual NFL bankruptcy
What sets this bankruptcy apart from the usual lavish spending of those that file is that Mr. Brackett lived a modest lifestyle. After his football retirement, he earned an MBA from George Washington University in 2013, and only about $1.5 million of the listed debts are personal liabilities. The rest are business loans and liabilities from his shuttered restaurants. By all accounts, had the last year and a half of economic craziness not happened, Mr. Brackett would not have needed to file for bankruptcy.
The bankruptcy escape hatch
For Houston, Texas, residents that find themselves deep in debt with no way out, bankruptcy can be an escape hatch. It offers a fresh financial start that is used by many of the wealthiest and most powerful people in the U.S. It is simply a financial tool.