Kane filed for chapter 7 bankruptcy, better known as a liquidation bankruptcy. Kane will be required to list all of his assets and label them as either exempt or non-exempt. Exempt assets will be ignored in the bankruptcy, but the non-exempt assets will be gathered by the trustee and distributed to creditors. Exempt assets include equity in a primary residence (up to a point), a certain amount of cash on hand (checking/saving account), 401k account, etc.
If Kane's financial advisors did a decent job in preparing for this bankruptcy he will have minimal non-exempt assets, and he may have none at all. The average chapter 7 does not have any non-exempt assets (of course, the average chapter 7 isn't filed by a professional athlete making millions per year).
Secured creditors do have priority in a bankruptcy, but only in so far as their particular piece of collateral is concerned. Let's say Kane owes $5 million on a house that is worth $4 million. If Kane doesn't want to keep the house, and stops making payments, that creditor can file for a relief from the bankruptcy and foreclose on the property. That secured creditor gets to keep all proceeds from the foreclosure (4million) and the difference between what Kane owed (5) and the resale value (4) turns into a $1 million unsecured claim. That 1 million unsecured claim can then receive a pro-rated payout from any non-exempt assets the trustee collected.
If Kane wants to keep the house, and continues making payments, the secured creditor will be essentially ignored in this bankruptcy. If there are non-exempt assets this secured creditor would not be eligible for a payout.
