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Bankruptcy may be option for anyone, even those with high incomes

During hard financial times, as the last few years have brought for many people in New Hampshire and throughout the country, many people choose to file bankruptcy for debt relief. Mounting debts can be a result of loss of employment, medical bills, divorce or any number of legitimate problems. But most people think of bankruptcy as an option for a person of average or below average income. Surprisingly, even those who make millions may find themselves in the position of needing debt relief.

A recent article discusses the perils of college athletes who suddenly become rich and famous when they enter the world of professional sports. The article cites a Sports Illustrated story from 2009, which reported a statistic that 78 percent of NFL players find themselves in bankruptcy or at least reporting some financial issues within two years of exiting the league. And statistics for NBA players are not much better. Within five years of retiring, three out of five players are broke.

But the outlook isn’t necessarily much better for young adults across the board. Financial challenges for professional athletes may range from reasons like careers that end prematurely due to injuries, to poor decisions about investments. Other recent college graduates may not have adequate money management skills, and most of them do not have a manager who helps them make financial decisions.

Student athletes who never enter the pros may have some of the worst money management skills. Many of them have unrealistic aspirations that they, too, will one day earn millions as a professional athlete. But in reality, for most sports, the number of college athletes who make it to the pros is less than 2 percent.  And, to add to the problem, some colleges have a culture of allowing college athletes to glide through academics with easy majors that do not necessarily prepare them for any real workplace.

The big financial picture for athletes is a good lesson for the rest of us. If someone with a multi-million dollar salary needs to file bankruptcy for debt relief, the average American who earns five figures may also find bankruptcy to be the best option to eliminate debt and get a fresh start. 

Source: The Fiscal Times, “When Hoop Dreams Turn to Bankruptcy Nightmares,” Christina Couch, March 14, 2014

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