University of Arkansas head football coach John L. Smith filed for bankruptcy earlier this month, revealing he had acquired $25.7 million in debt during the last several years. Smith’s bankruptcy has made national headlines because of the amount of his personal debt and the prominence of the debtor. However, the reality is that in a number of important ways, Smith’s bankruptcy is very much a run-of-the-mill Chapter 7 liquidation.
According to Smith’s bankruptcy filings, Smith accumulated a considerable amount of unsecured debt, particularly in relationship with the amount of money he earned as a football coach. While Smith’s contract with the University of Arkansas – $850,000 over 10 months – clearly makes him a high-income earner, even this salary isn’t enough to feasibly support his level of debt.
How could a debtor with millions in unsecured debt reflect many Chapter 7 debtors? First, Smith’s debt originated primarily from a series of Kentucky-based real estate transactions that were premised on the assumption that the land would increase in value. When property values tanked, equity holders like Smith became obligated for the debt.
Second, Smith isn’t a professional failure. The opposite is true, in fact. Smith’s success at the University of Louisville earned him the position of head coach at one of the most storied and prominent football schools in nation’s premier college football conference. As Smith himself admitted recently, his skills on the gridiron didn’t translate to business.
The painful truth for many debtors and their families is that bankruptcy court dockets in Arkansas, Texas, and throughout the country are filled with Chapter 7 debtors who are talented, intelligent, experienced, and successful professionals. They just made commercial and financial mistakes. And frequently, those mistakes took the form of real estate that looked promising, but ultimately plummeted in value.
Ready to talk to the attorneys at Fears Nachawati who can help you chart a course through the choppy waters of personal bankruptcy? With years of experience and dedicated expertise, we know how to protect you and your family from hard-nosed creditors. Start your journey toward solvency today by contacting our professionals.