Just last week former Alliance of American Football players were being blocked from signing with CFL teams as their contracts were seen as assets in a potential bankruptcy filing.
On Wednesday ESPN reported that the defunct league has officially filed for Chapter 7 bankruptcy in Texas.
The league has $48.4 million in liabilities which includes $9.6 million owed to creditors but only $11.4 million on assets with only $536, 160.68 of that in cash.
A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13 or negotiations with creditors to alter terms of repayment without selling off assets as in Chapter 11. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay creditors.
The AAF released a statement after the filing:
“We are deeply disappointed to be taking this action. The AAF was created to be a dynamic, developmental professional football league powered by an unprecedented alliance between players, fans and the game. The AAF strove to create new opportunities for talented players, coaches, executives and officials while providing an exciting experience for fans. We are proud of the fact that our teams and players delivered on that goal.”
The AAF had two lawsuits pending against them for fraud and breach of contract and for violation of labor laws. With the company filing a petition for bankruptcy those lawsuits are now suspended and new lawsuits are forbidden from being filed under an automatic stay protection.