Former NFL defensive lineman Warren Sapp recently filed for Chapter 7 bankruptcy in Florida. Chapter 7 bankruptcy is also called liquidation bankruptcy because most of the debtor’s assets are liquidated (i.e., sold by the bankruptcy trustee) and the proceeds are used to pay off creditors. Certain categories of property are exempt from liquidation so that the debtor is not left penniless. According to Sapp’s bankruptcy filings, Sapp has $6.45 million in assets and reportedly owes almost $7 million to a variety of creditors. A noticeable portion of this debt is due to unpaid child support and alimony obligations.
With a past NFL salary in the millions and an annual retirement income of more than $1 million (Sapp currently works as a sports commentator and writer), how did Sapp manage to live above his means? Like many professional athletes who have found themselves in the poorhouse, Sapp spent a lot of money on luxury items and did not keep up with his domestic support obligations. For example, he owns a $2,250 watch and approximately $6,500 in name-brand sneakers.
Sapp is not an exceptional case; he is but one example of a widespread problem in the professional sports arena. As reported by Sports Illustrated, 78% of NFL players find themselves in dire financial straights in the first two years of their retirements. Similarly, 60% of NBA players run out of money within five years of retirement. In an effort to lower these figures, the NFL provides its new hires with financial management training. However, the training does not appear to be alleviating the epidemic of once-rich professional athletes going broke. To name a few, Terrell Owens, Dennis Rodman, Deuce McAllister and Allen Iverson have all recently gone broke despite having earned millions of dollars per year as professional athletes. Other athletes’ financial troubles appear to be linked to criminal activity. For example, Lenny Dykstra, Mike Tyson and Marion Jones all served jail time and lost most of their riches. Sapp himself does not have much of a record. He was arrested for an alleged domestic battery charge but was never prosecuted in court due to consistency issues with the victim’s testimony.
In addition to legal troubles, extravagant purchases and domestic support obligations, many athletes have lost money as a result of not managing their investments well. For example, Raghib “Rocket” Ismail, who was the top NFL pick out of college but instead signed with the CFL, lost his riches due to failed investments in a cosmetic procedure, a restaurant chain, memorabilia stores and a record label.