Some people feel discouraged from talking to a New York bankruptcy lawyer because they believe bankruptcy is something only irresponsible people do. That’s understandable, if misguided. Occasionally, however, the news provides opportunities to reassure people of the truth. For example, in April the National Bureau of Economic Research (NBER) published a paper researching “short-lived income spikes” among NFL players.
The NBER paper addresses the trope about the superstar who gets rich too quick, wastes the money, gets injured (or whatever), and then goes broke. Really, it’s at least as old as the tortoise and the hare, so empirical research on the subject is welcome. Thus, the researchers’ question isn’t about football players per se; rather, it’s the “life-cycle hypothesis,” which says that people save money when they accumulate income to spend it when they don’t. The hypothesis predicts that athletes, with their large early age incomes, will save much to prepare for when they can expect to have lower incomes after they retire.
According to the paper, a 2009 article in Sport’s Illustrated stated that just two years after retiring from the NFL, 78 percent of players filed bankruptcy or were otherwise under “financial stress because of joblessness or divorce.” That latter part may not include a bankruptcy, which is why the NBER’s insight can be helpful. The researchers focused on NFL players between 2000 and 2003.
Despite players’ accurate foreknowledge of the kind of income cycle they could expect to have, the researchers found that bankruptcies “begin to occur very soon after retirement and continue at a substantial rate through at least the first 12 years of retirement.” Specifically, after two years not even 2 percent of players had filed bankruptcy, but by 12 years 15.7 percent had. The authors discussed two additional bleak points: One, the highest-paid players were no less likely to file bankruptcy than the typical player, and two, players with longer careers also weren’t less likely to file bankruptcy. So much for the life-cycle hypothesis.
Most New Yorkers who file chapter 7 don’t have much in common with NFL players, i.e. not earning millions of dollars in several years. What they do share, though, is that job losses precipitate bankruptcy filings. Thus, if you’ve lost your job, then you shouldn’t feel bad about filing bankruptcy. The pros do it too.
The NBER paper can be found here, but here’s a link to a free, earlier draft (pdf).
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
