Former basketball phenom and erstwhile actor Darius Miles, who made over $60 million in his brief professional career, may have to part with his sports memorabilia collection at an upcoming bankruptcy auction.
The Los Angeles Clippers selected the 18-year-old East St. Louis High School standout in the first round of the 2000 draft; in 2001, Mr. Miles was the first prep-to-pro player to make the NBA’s all-rookie team. But a knee injury shortened his career, and poor business developments ate away at his assets. Some observers speculate that the young Mr. Miles also lacked maturity; for example, he was once suspended two games for arguing with coach Maurice Cheeks and later sat out ten games for violating the league’s drug policy. When Mr. Miles filed Chapter 7 in September 2016, he listed a $240,000 IRS debt and over $100,000 in “business debts.” Now, the bankruptcy trustee (person who oversees the bankruptcy on behalf of the judge) wants Mr. Miles to auction off a number of collectibles, such as a LeBron James signed jersey and an autographed Mark McGwire bat, to repay moneylenders. Mr. Miles’ money troubles are far from unique, as 60 percent of former NBA players file bankruptcy within five years of retirement.
Mr. Miles appeared in several basketball-related docudramas, as well as a 2002 National Lampoon film.
Exempt Assets in Bankruptcy
Some people refer to Chapter 7 as “liquidation,” but that term is very misleading, because it implies that Chapter 7 debtors must sell most or all of their assets to pay their debts. In most cases, the opposite is true, because Chapter 7 debtors very rarely part with anything during bankruptcy.
Mr. Miles’ case is an exception, but not because he was a basketball player and the trustee is somehow “out to get him.” Sports memorabilia is quite unlike rental houses, old vehicles, and some other commonly non-exempt assets. Memorabilia needs no fixing up and there are nearly always lots of buyers with cash in hand, so these assets are easy to dispose of. In contrast, some other property may need substantial repairs, and even then, the trustee may have to hold it for several months, and discount the price several times, before finding a buyer. Given these facts, the return is so low that seizing and selling the asset may not be in the creditors’ best interests, and that is the only consideration that counts in these cases.
Second, although Illinois has a large “wildcard” exemption which can apply to any asset, there is a dollar limit, and sometimes assets must be prioritized. Mr. Miles declared substantial amounts of cash in his Chapter 7 petition, so he made the wise decision to hang onto cash and part with some items that may have been sitting in his garage.
Even considering the memorabilia, Mr. Miles got to keep far more assets than he lost. Some of the exempt assets under Illinois law include:
- Homestead: Single filers can exempt up to $15,000 in home equity, and unless they have been in their homes for many years, most people are far under this limit.
- Retirement Accounts: Earned 401(k)s, IRAs, pension plans, and other retirement accounts are 100percent exempt regardless of value.
- Cash: 85 percent of current wages are exempt, up to 45 times the federal minimum wage per week.
- Wildcard: Debtors can exempt up to $4,000of otherwise non-exempt property simply by checking boxes on their schedules.
Bankruptcy’s automatic stay prohibits moneylenders from taking adverse action, so if any assets are liquidating, the debtor is in control.
Reach Out to Experienced Attorneys
To hang onto as many of your assets as possible while still getting your fresh start, contact an experienced bankruptcy attorney in Chicago from the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.