Former Major League baseball star, Jose Canseco, has an “interesting” financial situation as he files Chapter 7 bankruptcy paperwork. Although technically playing for the independent minor league Worcester (MA) Tornadoes, he filed for bankruptcy, not in his home jurisdiction, Miami, but in Las Vegas. One of Worcester’s top bankruptcy attorneys volunteered to comment on Canseco’s situation.
Filing for Chapter 7 bankruptcy (liquidation) is an option for both individuals and businesses. Once you file, the court appoints a Trustee and creates a “bankruptcy estate.” The Trustee is responsible for finding assets that can be turned into cash to pay creditors. Seldom are creditors paid-in-full, as assets are usually lacking, which is the typical reason for the bankruptcy filing.
Canseco appears to be taking advantage of a major “quirk” in bankruptcy regulations. Although a federal law, bankruptcy allows individual states to modify some provisions. Most states name their own “exemptions,” which are those items a person can exempt from the bankruptcy estate. These assets typically include personal homes, auto(s), personal property and other items identified in state law.
The former Major League star is claiming exemptions for most of his hard assets. If the court agrees, Canseco’s file becomes a “no-asset case.” He declared less than $21,000 in assets, but over $1.6 million in debt. A significant amount, almost $450,000 owed to the IRS and a $285,000 lien, complement a $785,000 court judgment and $150,000 due the California Tax Board.
The automatic stay when filing for bankruptcy protection will offer Canseco temporary relief from creditors, prohibiting collection activity and lawsuits. The bankruptcy expert concurs that, if this was an “honest assessment” of his assets, filing for bankruptcy protection is a “no-brainer.” Canseco stated his average monthly income at $7,500, although his minor league contract calls for compensation at only $1,000 per month. Since he’s been on the disabled list since June, it is unclear if the Tornadoes are even paying that modest player salary.
How do you feel about the famous (or infamous) Jose Canseco, former baseball star, admitted steroid user and two-time tell-all book author, submitting this rather unusual and confusing collection of bankruptcy documentation? Should the bankruptcy Trustee be extra diligent in verifying his available assets?
Source: GoLocalWorcester, “A Look at Canseco’s Bankruptcy Documents,” Joe Parello, Aug. 4, 2012
Our firm handles similar situations to the one discussed in this post. If you would like to learn more about our practice, please visit our Miami Chapter 7 bankruptcy page.