What do teachers, retailers, heating oil sellers and NFL players have in common?
People who choose these professions must anticipate that their income will be concentrated during specific times each year, not delivered weekly, bi-weekly or monthly like most salaried employees. While teachers do receive their income over a nine month period when school is in session, during 25% of the year they receive no income. Similarly, many retailers must budget the holiday season earnings over the rest of the year, and sellers of heating oil must anticipate that their cashflow will suffer during the summer months.
According to the excellent ESPN documentary Broke (part of the 30 for 30 Series) the uneven stream of NFL cash is one of the factors that causes professional football players to struggle financially, a condition that is paradoxically both surprising and obvious. Players get into trouble when they spend as if their in-season salaries will continue all year; when the season (or the playoffs) end, they often cannot adjust to the fact that their income will end too. At that point, they must cope with six or seven months without cash until the start of the following pre-season.
Real world debtors need to understand this phenomena in planning or executing their own bankruptcy case. In Chapter 11 or Chapter 13, the bankruptcy attorney needs to anticipate spikes and dips in money available to pay creditors. This way, if possible, attorney and client can present an appropriate plan of reorganization that addresses this reality by adjusting the monthly payment based upon the client’s available cashflow.
In Chapter 7, when the client and the attorney have the luxury of being able to plan the case ahead of time, the attorney should time the filing to consider that the means test has a six-month lookback period. This way, a debtor whose annual income is really below the state’s median income level does not get penalized by a six month analysis that inaccurately and unfairly overstates the debtor’s income.
Do you think football players are really like teachers and small seasonal retailers? Please let me know your thoughts in the comments section.
