Ex-NBA Star Takes a Shot at Bankruptcy
On the way up, we often forget that a downhill is probably just ahead—the current situation in the housing market provides a perfect example. Many people who bought homes at inflated prices during the housing boom are losing serious money or facing foreclosure now that the bubble has burst.
The same often happens to pro athletes who retire and continue to live the lifestyle of someone earning professional-athlete sized paychecks. One of the latest of such riches-to-rags stories is that of Jason Caffey, a one-time NBA star whose career ended five years ago.
Caffey, 34, played for the Chicago Bulls, the Golden State Warriors, and the Milwaukee Bucks during his tenure in the NBA. According to the Alabama Press-Register, he has recently filed for bankruptcy in response to child support payments he can no longer afford on top of his other debts.
Apparently, Caffey has already been in legal trouble twice in 2007 because of missed child support payments to the seven mothers of his eight children. In Georgia, a judge allegedly issued a warrant for his arrest, and he actually spent time in an Alabama jail. Sources indicate that Caffey hasn’t made a child support payment since May, 2005.
In bankruptcy cases, child support is considered a non-dischargeable debt, which means that Caffey will eventually have to cough up the money he owes his children’s mothers. But the automatic stay protection bankruptcy provides will prevent creditors (including the mothers) from making any collection efforts while the bankruptcy is pending.
Some of the mothers’ lawyers are allegedly glad to hear about Caffey’s decision to file bankruptcy. The protection will excuse Caffey from some of this other debt obligations, thus freeing up his resources for child support.
But how did Caffey, who signed a contract for $35 million in the not-so-distant past, end up in bankruptcy court?
According to sources, Caffey did not actually receive all of his $35 million because his career finished three years before his contract expired. And of course, taxes take a big chunk of that, and Caffey’s wife got a lot in their divorce.
Caffey’s bankruptcy attorney has allegedly insisted that the child support and alimony Caffey is currently expected to pay are not reasonable for someone no longer earning the salary of a professional athlete. Sources indicate that Caffey’s various investments offer him a monthly income around $11,500, and his child support payments cost him $7,000, or more than 50 percent of that sum.
Plus, according to the Press-Register, Caffey has invested around $2.5 million in restaurants and other business ventures that he expects to benefit his children financially years down the line.
Whether or not you think Caffey could have handled his finances better to avoid his depressing downfall is ultimately unimportant. His experience illustrates an important point: anyone can need bankruptcy protection. And, in some cases, filing chapter 7 bankruptcy is the most effective way to manage and protect what remains of your assets.