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Super Bowl rings up for auction in chapter 13 case

Debates over the national debt have filled the news in recent weeks. While the nation struggles with its debt, many Ohio residents reflect on their own financial status. The economy has affected many Cincinnati residents adversely. There are a number of types of bankruptcy protection available under federal law for individuals to recover from financial distress. The two most common forms of bankruptcy for consumers are known as chapter 7 and chapter 13 bankruptcy relief.

Not all Ohio residents qualify for chapter 7 bankruptcy, which is known as a liquidation bankruptcy. An individual is allowed certain defined types of assets that are exempt, meaning the debtor keeps the assets up to a defined value. Chapter 13 is for individuals who have an income and may be able to pay back all, or a portion, of their outstanding debt. Most consumers can retain all of their assets in a chapter 13 bankruptcy plan. But, in some cases, like the chapter 13 case involving former NFL great Ray Guy, some assets may be too expensive to retain, even in a chapter 13 bankruptcy.

The retired NFL player suffered financial distress and chose to seek relief under chapter 13. A person filing for bankruptcy must report all of their assets and liabilities in a bankruptcy case. The most well-known punter in the NFL played in three Super Bowls and has the rings to prove it. However, the rings reportedly may have a combined market value in the $75,000 to $90,000 range.

On order to keep the rings, Guy would have to have sufficient income to cover the market value of the rings over the course of a 3-to-5-year chapter 13 payment plan. That is a hefty sum. The three Super Bowl rings are currently up for auction and will be sold if the bids exceed a specified reserve value. The auction is scheduled to close Tuesday.

Guy has outstanding taxes and the IRS has the first claim to the proceeds of the auction up to slightly more than $63,000. Generally, taxes are not dischargeable in a bankruptcy proceeding. A chapter 13 plan often can provide an individual with tax debts with the opportunity to cure or reduce the back taxes. In Guy's case, the Super Bowl rings may be the best choice to relieve the back taxes. Any proceeds in excess of the amount claimed by the IRS will also roll into the chapter 13 plan to cover other liabilities.

It is a rare case. Sports memorabilia can often carry a higher market value than similar assets. Super Bowl rings are relatively rare items. Most Ohio residents who have non-exempt assets are able to retain their property through a chapter 13 plan.

Source: Bloomberg, "Ex-Raiders Punter Guy Auctions Super Bowl Rings After Bankruptcy," Eben Novy-Williams August 2, 2011

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