I’m no expert (so take this with a grain of salt), but I have to review bankruptcies occasionally for work. They aren’t always cut-and-dry. Sometimes the person presents alternative proposals to liquidating everything and giving all their discretionary income for a limited period of time. In Canada they are called “Consumer Proposals”, but not sure of the details in the USA.
The creditors here are probably considering a similar proposal from Kane. They might play hardball and ask to liquidate everything and/or take a considerable amount of his net income, and/or extend the proposal period multiple years (I have seen some proposals go 5 years). Kane is likely putting it out there that if their demands are too onerous, he’s willing to screw them completely over and throw away his guaranteed income.
This isn’t a bad strategy either, since if his proposals aren’t accepted, it would likely go to a standard bankruptcy. He’d lose pretty much all his assets, and all his discretionary income for a set number of months (as low as 9 months in Canada - so possibly just 1 season), but after that he’d be completely free-and clear. And he’s young and effective enough to still make decent money going forward, none of which could be taken by former creditors.
My guess is, Kane is trying to save his house, keep enough of his income for the next few years for his family to still live well, and keep the last few years of his contract out of the deal so that he’ll still have a nest egg for his family. If the creditors don’t like that, and are threatening to take more (for longer) or go full insolvency, he’s threatening to pull a grenade pin on them. Sucks for his creditors, but it is probably his right. Even if that could be challenged under normal circumstances, the prevalence of COVID and his family circumstances make it a conveniently placed grenade for him.