Yes, this is what Warren Sapp, former NFL player and Dancing with the Stars contestant did on March 30, 2012. Mr. Sapp filed for Chapter 7 in South Florida stating that he owes more than $6.7 million to creditors and back-child support and alimony. His reported assets are $6.45 million. What does this mean and how did it happen?
It happens because Mr. Sapp was spending more than he could afford, even more than his income of $115,000 a month. Bankruptcy happened because of poor financial decisions, poor financial planning and thinking of the short-term, immediate gratification--not the long-term gain. It happened because he was living life beyond his means.
Chapter 7 bankruptcy is also known as “straight” bankruptcy or liquidation and allows an individual to keep certain exempt property. Assets are sold by a bankruptcy trustee to repay creditors and many unsecured debts are discharged. Florida does not allow the bankruptcy courts to sell your home because the equity is protected by the Florida Constitution. Florida also exempts IRS approved retirement and pension funds and personal property valued at $1,000 or less. Chapter 7 bankruptcy also allows you to reaffirm your secured debt so you can keep your car, furniture or house by renegotiating with your lender.
For Mr. Sapp, he has 240 pairs of Nike Jordan shoes worth $6,500, a watch worth $2,250 and a lion skin rug worth $1,200 that will likely be liquidated by the bankruptcy courts. However, his Super Bowl ring and 1991 national championship ring will not be auctioned off because he lost them.
Lessons Learned:Ø One can always spend more than he or she makes.
Ø You need to have a budget and keep a spending limit to what you can afford.
Ø When is enough ‘enough’? Really…how many Jordan athletic shoes do you need?
Ø Review your values and make sure you are using money as a resource to reflect your values.
Ø Live below your means; always pay yourself first and save at least 10% of your income.
If you want a pair of Nike Jordan shoes, contact the South Florida bankruptcy court!