Life is ironic some times. Here I was someone growing up that thought that people that found themselves bankrupt were messed up in some way. Yet in 1990 I found myself in bankruptcy. I learned that living through bankruptcy is a whole lot different and that for all those people before that, whom I might have turned my nose up at, I am very sorry. I was dead wrong to judge you.
Is It Bad to Go Bankrupt?
This is a question I am often asked. But the answer is that bankruptcy really isn’t good or bad. At the end of the day bankruptcy is nothing more than a legal process that gives the consumer rights and protections under the law.
I could easily argue that solutions like debt settlement are bad or even credit counseling is bad. How’s that? In the case of credit counseling let’s take the family that gets into a credit counseling program and can make it month-to-month making the minimum payment but not able to save money. The lack of resources means the kids still don’t go to the doctor as much as they should and many other things in life are off limits or not available.
Just because you solve one part of a problem, does not mean the original problem is fixed. In the credit counseling case it is not better to avoid bankruptcy but not be able to build up an emergency account or savings fund to protect you. Let’s say you remain living in a less safe area since you can’t afford to move so you can make your credit counseling payment. Is that bad or good for the family?
So let’s look at the person that is afraid of bankruptcy and decides to do debt settlement instead. They go through the typical monthly payment debt settlement process and as is usually the case they find themselves far behind on their debts, getting sued and now with horrible credit, not to mention the collectors calling.
It will take this person a lot longer to rebuild their credit and even when they do they’ll have a bunch of lawsuits on their credit record. And people do this because they think bankruptcy is bad.
What Does it Feel Like to File for Bankruptcy?
As someone who went bankrupt, I can’t say bankruptcy was fun. But then again at the time I had all the wrong mental attitudes about my situation. In hindsight bankruptcy was the best thing I could have done to start my life over. I went from being homeless with my wife and a three year old daughter and living with my parent to two years after bankruptcy getting a mortgage and buying a house.
The video above Pam and I shot years after our bankruptcy right after we came out of the closet about our bankruptcy. I think the video describes what we were feeling at the time. What it does not convey is the fact the creditor/debtor system in America is broken. I didn’t want to go bankrupt, I felt horrible about it, but I was in a position with no reasonable expectation I was going to be able to dig myself out. The bankruptcy attorney we met with at the time was right, it was a legal and valid option for us and it would give us a fresh start.
Looking back on it now, the reason bankruptcy felt so horrible and like I’d have a big stigma as a result was because nobody explained to me the reality of being in debt.
The Truth About Facing Bankruptcy
When you owe banks and credit card companies it is not like you owe an individual some money. If you owed me and you ran into trouble you’d probably call me up and we’d work something out to allow you to get back on your feet. I’d be reasonable and accommodating.
When you owe a business or bank it just does not work like that. The bank has a big process they follow. When you are making at least the regular minimum payment they don’t pay any attention to you, except to sell you more credit.
It’s when you miss a payment and get behind that you draw attention. This is when they go to the Process Book. This book is nothing more than the accumulation of the policies and procedures of the bank. Let’s say when you first fall behind they follow what it says on page 10. You fall further behind they turn to page 20. Page 30 has a different set of things they will do when the account gets more delinquent or you make a promise to pay and miss it.
The bank doesn’t judge you, they process you.
The bank doesn’t judge you, they process you. If a collector is issuing statements that make you feel like they are judging you, they aren’t, they are manipulating you to pay. And isn’t it true that if you could pay, you would?
Let’s say you get far enough behind you are getting sued, the debt collectors are harassing you, or maybe your account has charged off and been sold to someone else to start the collection process all over again.
Unless you have the money to pay back the debt, you just get dumped right back in the hopper and get chewed up by a new process. The process does not treat you as an individual. It is not accommodating, it certainly is not judgmental.
So Should I Think About Bankruptcy?
If you have found yourself in a situation where you:
- can’t meet the demands of your creditors;
- there is not a reasonable expectation you will be able to keep yourself safe with shelter, food, and clothing;
- you are cracking under the pressure fro collections;
- you feel depressed and can’t see any hope;
- you can’t sleep because you are constantly worried about your situation;
- it is impacting your work and relationships;
- you are considering a debt settlement program or credit counseling; or
- you can’t increase your income and/or reduce your expenses to make ends meet.
That’s when you need to meet with a local bankruptcy attorney. Click here to find a local bankruptcy attorney you like.
In my humble opinion, the truth about bankruptcy should be to encourage people to speak to a bankruptcy attorney and specifically learn what bankruptcy would mean for them in their situation.
Meeting with a local bankruptcy lawyer does not mean you are going to go bankrupt. In fact it means you are doing nothing more than seeking out advice from a legal professional about a legal process they specialize in. Without that personal consultation and advice you can’t make a good decision if bankruptcy will be right for you. All you can do is guess. That’s really not helpful, factual or accurate.
So How Do I File Bankruptcy and Not Let it Tear Me Up?
The first step to approaching bankruptcy in a healthy way. Once you realize the debt collection cycle is a process you have no control over, you have no way to break the cycle and you need legal protection from your creditors, then you can look at bankruptcy as an administrative process that allows you to have some control over an otherwise bad situation.
What About Feeling Like a Loser for Filing Bankruptcy And Having This Stigma?
The reality is bankruptcy doesn’t make you feel like a loser, we do that to ourselves. After my bankruptcy the only people on the entire planet that felt anything or thought about my bankruptcy, were my wife and I. We managed to beat ourselves up and live in shame because we allowed ourselves to feel like that.
The moment we let bankruptcy be our secret, that’s when we turned over another decade of our life to our creditors. I was always afraid someone was going to find out and as long as I had that secret, it was a stigma. Going public about my bankruptcy was the most liberating thing I think I’ve ever done. The minute I could stand up and say I went bankrupt and here’s why, that’s the moment the scarlet letter I sewed on, came off. That’s when I stopped living in fear of what others might think.
It was a bad time, I tried to avoid bankruptcy, I found myself in a deep and dark corner with no reasonable way out that would allow me to balance my responsibilities for my family and our future.
Just Because Bankruptcy Was Hard Does Not Mean It Was Wrong
You will hear people say bankruptcy was the hardest thing they ever did. Don’t confuse their words with what they really mean. It’s not the specific process of bankruptcy that is hard or difficult, but all the stuff we have to live through up to the moment you go bankrupt. It’s the pain of not being able to pay your bills, the collections calls, not being able to sleep, etc. The actual process of bankruptcy is a bunch of paper and legal help.
If anything, bankruptcy is the one step, the one investment, you can make that will provide direct relief for the financial situation you are in right now and start over. It is truly a fresh start.