Re: Evander Kane files for bankruptcy
So as usual Lawman posts on hockey forums should not be conflated for legal advice.
Short answer, I suspect the threatening to not play for a year is a combination bluff (to get his creditors to accept less money) and/or plea to the court to grant his bankruptcy application. I have never practiced any law in the USA but I have been involved in a few bankruptcies in Canada, best I can tell the process is pretty similar.
A couple definitions
“insolvency” a financial status where a party’s liabilities > assets, or, where a party cannot pay their debts as they generally become due. Basically, if you owe more than you are worth you are from an accounting perspective “insolvent” however, so long as you have a path back to zero net worth you will not become bankrupt. Just about every student to graduate with student loans is insolvent.
More commonly, if you cannot pay your bills on a consistent basis you are insolvent.
“bankruptcy” a formal process where an insolvent party’s assets are collected and distributed in an orderly manner to its creditors. There are millions of people who are insolvent at any given time in the USA (and many in Canada as well). To move from insolvency to bankruptcy requires a formal court filing, it can be done either: by the party itself, or, by a creditor of the party if certain criteria are met.
Going to focus on personal bankruptcies. For personal bankruptcies the idea is that all your assets are gathered and sold by the Bankruptcy trustee (at direction from the Court). The resulting funds are used to pay off your creditors pro rata (in proportion to your debts) so if you owe twice what your assets sell for all creditors get 50% of the debts. (It’s way more complicated than this obviously but that’s the one sentence explanation). The bankrupt is then “discharged” from bankruptcy and all its debts are wiped clean and the bankrupt comes out the other side owning (almost) nothing but owing no further debts. Bankruptcy is a reset that allows a debtor drowning in debt to restart, typically, in cases where the bankruptcy was not intentionally caused or grossly negligent the bankrupt will be discharged.
Most bankruptcies are a result of bad luck, poor financial planning/business attempts or a combination. Most first-time bankruptcies are unopposed by creditors who take what they can get from the assets. The bankrupt surrenders all of their assets except “exempt assets” (basic clothing, car, food even) and starts over.
However, generally speaking, a creditor can object to a bankruptcy plan, or a discharge from bankruptcy. A creditor is only going to object if it thinks it can get more money by doing so (including factoring in time delays and legal costs). So, for the average person who is -$50,000 an objection is not worth the effort. For a case like Kane’s where he is -$16mil the creditors are going to be much more interested in objecting.
Objections can be made for two main reasons either:
1. The creditor believes the bankrupt can “dig himself out” with work and thus does not need bankruptcy; or
2. The bankrupt was the cause of his own bankruptcy (due to overspending, or gambling is a common reason) and thus the court should disallow the bankruptcy discharge on “moral” grounds.
In Kane’s case he has listed liabilities at $26mil and assets at $10m so he’s -$16mil give or take. Further, Kane states he may sit out the year and thus has $0 in income going forward. Looking at just that picture it would seem obvious there is no way for Kane to dig himself out. This is the first reason he is threatening to sit out. Basically, Kane is arguing it is best for the creditors to take what they can get and he should get the reset that comes with a bankruptcy discharge.
Now, creditors are going to argue that even though he is -$16mil he can still dig himself out. He has an NHL contract which is essentially the most guaranteed income possible. Typically, courts look at “earning potential” and try and determine what reasonable amount the party can earn, often this requires a bit of “crystal ball gazing” in Kane’s case that’s not the case. We know what he will earn, its $49 mil over the next 7 years. Creditors can oppose his bankruptcy based on the fact that he does have the ability to dig out of the hole if he just stops blowing his money. Hell, he could live “only” $250k a year and be solvent in a few years.
I will pause and say the court has all kinds of middle ground options between Kane’s requests and the creditor requests. A most likely option is a partial or “conditional” discharge wherein Kane has to pay off $x additional over the following y months. So basically probation, if he pays a further $10mil over the next 3 years he gets a discharge. Further, the Court could garnish all his income and give him a living allowance. That would see the Sharks pay the court each month, and give Kane back a certain amount to live.
The other reason creditors can object is because it is believed the bankrupt was the cause of the insolvency through extremely poor judgment. Again, typically bankrupt individuals are good honest people who had bad luck (medical bankruptcy is the #1 cause in the USA which is irrelevant but sad), or took a big business risk that was honestly attempted but did not work out (lots of these coming for people who opened restaurants and personally guaranteed leases and equipment rentals for same). However, in cases where the bankrupt just spends frivolously, or gambled money away a large portion of his earnings, the Court may reject the bankruptcy or impose repayment conditions. There are strong rumors that Kane lost large sums of money gambling, and frankly given his career earnings and current financial status at least some of this has to be frivolous spending. Given these factors an unconditional discharge seems unlikely.
On to the refusal to play. A court cannot force someone to work, but, where a bankrupt has clear earnings potential and refuses to work the court can deny bankruptcy discharge because a bankrupt has a duty to creditors to try and assist in repayment. In a non-covid world there is no way that Kane would be discharged if he sat out the season. I personally think the sitting out due to covid is just an excuse (plenty of people are doing more dangerous work for far less money in the face of covid) but who knows how the Courts will view that. Kane does have a new born child and a sympathetic court could find the work is not worth the risk. In any event I doubt it comes to this as all the indications from the Sharks and NHL are he is playing.
Likely Court Ruling: Kane is granted a conditional discharge. After all his non-exempt assets are liquidated, he is left with his clothes and a modest car, he has a net worth of -$16million. Kane is required to pay back an additional $8-12 million over 3 years and if he does that he is discharged. Kane’s salary is garnished at that rate for the next 3 seasons to ensure creditors get some repayment.
Kane is pissed off by all of this and uses that motivation to set pro rata career bests in G, PIMs, PPP and SOG (see my signature).
12 team H-2-H 1 year league, daily roster changes, 3 goalie start minimum/week
2xC, 2xRW, 2xLW, 4xD, 3xUtil, 2xG, 5 Bench
G, A, P, PIM, PPP, SHP, GWG, SOG, Hits, W, SV%, GAA, SVs
C: C. Keller, C. Mittelstadt, B. Nelson, R. Strome,
LW: K. Connor, B. Tkachuk, J. Gaudreau, J. Marchessault, E. Rodrigues, A. Lafreniere
RW: K. Fiala, J. Bratt, T. Jeannot V. Arvidsson
D: R. Josi, J. Trouba, E. Gustafsson,
G: L. Thompson, F. Gustavsson, V. Vanecek
NO IR
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