College Sports: NIL & Bankruptcy?

By: Donald L Swanson

There is an entirely-new group of rich people:

• well . . . they aren’t actually rich, compared to the truly rich; but
• compared to most of their peers, they are fabulously rich.

NIL Benefits

The entirely-new group consists of high-end college athletes.  They are a newly rich group because they are receiving something that others like them could not previously get: NIL benefits.

NIL is short for “name, image and likeness.”  NIL designates the right of a college athlete to profit financially from the notoriety created by his/her actual or expected performance in a college sport.

Two Examples

Here are two recent NIL examples:

• it’s reported that a Division 1 basketball player, in transferring from one school to another, will receive NIL benefits totaling $640,000; and
• a tweet is going around with a video of a college football player taking delivery of a very-expensive SUV as an NIL benefit.

All of that is great for college athletes.

A Curmudgeon

I hate to be a curmudgeon. 

But my initial reaction, as an attorney with lots of experience in bankruptcy cases, to each of the two examples is this:

• upon hearing about the $640,000 NIL deal, “I hope they’re withholding for taxes,” and “I hope the athlete is hiring a tax accountant—before the money is gone”; and
• upon seeing the athlete get into the new SUV, “I hope the NIL deal also covers upcoming costs, like registration, taxes, insurance, maintenance and gas—all of which will turn that SUV into a money rathole for someone.”

Mature adults with years of hard-knocks experiences often have difficulty managing a checkbook, paying taxes, and spending less than they earn.

And now we’re expecting college-age kids to do such things with large amounts of money—but without those hard-knocks experiences.

A Presumption, a Guess & a Duty

Presumption: My presumption is that all colleges who recruit and retain their athletes with high-value NIL deals are also training those athletes in money management and taxes.

Guess: But my guess is that such a presumption is wrong.

Duty: Each college that enables its student athletes to receive substantial NIL benefits has a duty to make serious and determined efforts to train those student athletes in financial management.

• Otherwise, the intended benefits of NIL will become, instead, the beginning of hard-and-unexpected financial challenges for many student athletes.

Conclusion

Unless each college fulfills the duty to train its NIL athletes in financial management, we will see high-end college athletes appearing as debtors in bankruptcy courts across the land.  

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