Superbowl champion, quarterback terror and perennial pro-bowler Warren Sapp has filed for bankruptcy in southern Florida, owing millions to creditors despite a six-figure monthly income. According to his filing, Sapp owes more than $6.7 million for child support, alimony and other debts.
- Football star owes $6.7 million, vs. $6.45 million in assets
- Makes $115,000 per month but still eligible for Chapter 7 bankruptcy
- Latest in parade of athletes filing for debt relief
Loophole in the Code
Sapp, who played in the National Football League for 13 years with the Tampa Bay Buccaneers and the Oakland Raiders and won the Super Bowl in 2002, is just one of some million and a half Americans who will likely file for bankruptcy this year.
However, unlike most of us who fall into untenable debt, the 1999 defensive player of the year made tens of millions in his career, and still pulls in a sizable chunk of cash from his analyst job on the NFL Network, plus other appearance fees. With a hefty monthly income of $115,881, at first glance the former player makes way too much to discharge his debts, but fortunately for him he qualifies for an exception.
"Sometime clients are surprised they are able to qualify for Chapter 7 [when assets are liquidated to pay creditors and remaining debts are discharged] when they make what many would consider to be a comfortable income especially since Chapter 7 bankruptcy has a strict income threshold to qualify," says Walter Benenati, a bankruptcy attorney in Orlando. "However, there is a loophole in the Bankruptcy Code that states if the majority of debt is business related debt, he is able to qualify regardless of his income and thus, avoid the dreaded income analysis called the 'means test'."
He might make plenty of money, but Sapp has serious expenses as well. Of his $111,170 in monthly expenditures, over $75,000 of it goes for alimony, child support and other support payments, and close to $30,000 for taxes and mortgage payments. He's divorced with six children, from ages three to 15, and his income is tenuous– it's unknown if he will continue to be employed at NFL Network past August of this year.
Back child support and alimony generally cannot be discharged in bankruptcy, but the filing could provide some relief from his other debts and help get his life back on track.
Debtors who file for bankruptcy in Florida must answer a detailed series of questions about their assets and debts in front of a court-appointed trustee, under oath. The trustee then oversees the liquidation of the debtor's possessions. Sapp's filing lists $6.45 million in assets, from his $1,200 lion-skin rug all the way down to a $3 waste basket in his master bathroom. Jordan-brand shoes were a big indulgence– there are some 250 pairs spread between three rooms in his house.
He won't have to sell everything. Some property is considered exempt, including, frequently, houses and cars, and does not have to be liquidated. Non-exempt property can sometimes be kept under a "buy-back" agreement with the trustee.
"He will have to pay back money to the estate in order to keep his personal property but a high profile case such as this one will undoubtedly receive extra scrutiny by the trustee in charge of administering his estate," says Benenati. "Issues like the valuation of personal property may come into question."
Notably missing from Sapp's assets are his 2002 Super Bowl ring and the college championship ring he won while playing for the University of Miami in 1991. According to his filing, he lost the jewelry.
As tempting as it might be for a person going through a bankruptcy to hide items of sentimental or real value to avoid losing them, deception would be foolish, especially for someone as well-known as Sapp. Fraud can be prosecuted in criminal courts.
Mo Money Mo Problems
Sapp's story is far from unique. According to a 2009 story in Sports Illustrated, 78 percent of football players go bankrupt or are "under financial stress because of joblessness or divorce" within two years of their retirement. In the last few months alone, a veritable all-star team of pecuniary distress has formed with former football, baseball and basketball players like Terrell Owens, Lenny Dykstra, Dennis Rodman, Antoine Walker and Allen Iverson. Sapp is merely the latest addition to the squad, trying to salvage financial stability for the second half of his life.
"Opening his personal life to the Federal Bankruptcy Court is brave," Benenati says. "Hopefully he will be able to get a fresh start as many other debtors do when it is all said and done."