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College football coach uses Chapter 7 to get debt relief

Massachusetts residents who follow college football regularly may have heard that the former interim coach of a major university recently settled his bankruptcy case. As a result of the coach's Chapter 7 bankruptcy, he will potentially receive a discharge of over $40 million in personal debt, and be able to keep some of his properties and other assets.

The coach filed bankruptcy after he said that he had made some bad real estate investments with several of his personal acquaintances and business associates. He claimed that despite being a college football coach and being able to amass $40 million in debt, he had less than $1.5 million in property with which he could pay his debts.

The coach's creditors objected to his Chapter 7 petition because he signed his contract as interim head coach days before he filed the bankruptcy. Furthermore, in that contract he made an agreement that the payment of most of his high-six-figure salary, over two-thirds of it, would be postponed until several months after he filed his bankruptcy.

Because his agreement was structured in this manner, he was able to take advantage of a Chapter 7 without being barred by income limits. Moreover, the deferred portion of his salary was his to keep without regard to the bankruptcy.

The coach recently settled with his adversaries, clearing the way for his discharge. Nonetheless, this case illustrates that Massachusetts debtors need to be mindful of their financial dealings around the time of their bankruptcy filing and need to especially be aware of where their money went. Not being able to show that money was taken and spent for innocuous reasons could hold up a bankruptcy and could, in extreme cases, prevent a debtor from getting debt relief. A qualified bankruptcy attorney may be able to answer specific questions in this respect.

Source: USA Today, "Ex-Arkansas coach discharged of debt in bankruptcy deal," Brent Schrotenboer, Sept. 5, 2013.

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