I am still amazed when I read uninformed posts about why people are going bankrupt claiming there is no more stigma about bankruptcy.
That is not true. People are going bankrupt because creditors are not allowing people to repay their debts with as much enthusiasm as the banks had when the person was borrowing the money. Many of those restrictions can be traced back to regulations, laws, and rules.
FACT: Good people can have bad debt.
People want to repay; creditors evidently don’t want the money back over time on terms both can agree to. Crazy, but true.
If I were an investor, especially an institutional investor in a major bank, I’d ask to take a good look at their repayment policies for people that have fallen behind in their obligations. I think you’d be shocked by the hurdles lenders put in place. But ultimately that is not material since investors are more concerned about the rate of return than a policy.
Banks can be good corporate stewards, but there is no requirement for them to be social workers or a financial safety net for people. That is the role of government.
This is the story of one person who went bankrupt and felt the stigma of bankruptcy.
In 1989 I went bankrupt, and in 1994 I founded the not-for-profit that started to help people find good solutions for bad financial problems. After living through the experience, I thought there had to be a better way. But it wasn’t until 1999 that I went public with the fact that I myself had gone bankrupt. And it coming out with that story wasn’t by my own volition.
Until that day in 1999, I had been able to hide the fact that I had gone bankrupt successfully.
Only about four people in the world knew my secret. I had not shared it even with friends. You see, perceived personal failure is not something that people want to broadcast. It is not a badge of honor. And certainly not a bumper sticker, you’ll see. “Kiss me I’m Bankrupt.”
I kept my bankruptcy quiet for the same reason everyone else does and will because it does hurt and felt like a failure at that time.
I’m sure that each person has their own reason why they want to withhold their bankruptcy secret. For some, it’s a shame; for others, it’s job issues. It doesn’t really matter. The fact is that going bankrupt is a part of your life that you are not proud of. The bottom line most would like for it to be a secret, forever.
Even today, when I read stories that too many people go into Individual Voluntary Arrangements (IVA), debt settlements, debt management plans (DMP), informal repayment plans, debt validation, Personal Insolvency Agreements (PIA) debt settlement programs, borrow from retirement funds to pay bills, or remortgage the house to pay off the debt, it makes me mad. The reason that people flock to these solutions is that they don’t want to go bankrupt.
But at the moment, people often avoid bankruptcy for the wrong reasons.
So many people turn to alternative solutions because they don’t want to go bankrupt; they want to repay their debts. But that is an emotional reaction to a mathematical problem. It took me many years to understand that.
Even today, while my bankruptcy has been a great life experience that I have been able to share to help countless others, if there had been another way to reach the same insight, I would have preferred to have found another way.
It’s kind of like becoming wiser for some reason by getting hit by a car. While the wisdom may help others, not getting hit by the car would have been nice as well.
Without my financial troubles and the bankruptcy experience, I don’t think there is any way to understand how others in the same situation feel truly.
I have not forgotten the moment my bankruptcy secret became public. I was being interviewed by The Washington Post for yet another consumer debt story, and the reporter asked me in passing if I had ever been bankrupt. Crap. A wave of panic spread through me. You know, that hot rush that comes over you in a crisis.
I had never contemplated coming out of the bankruptcy closet, and now I’m being asked by a reporter from one of the world’s leading newspapers. Crap, crap, crap. So I did what many people would do in that situation, I said, “No.”
The reporter left, and I turned to my friend and PR Director and said, “Nancy, I just lied to the freaking Washington Post. I did go bankrupt in 1989.” Nancy listened while I shared my story with her and explained the shame and failure that I felt by being bankrupt.
I then immediately went and talked to my wife, Pam, about this situation. While neither of us wanted to come forward with our personal failure, we felt that we had to be honest about the reality and that doing so might help someone else. We really did get dragged out of the closet, kicking and screaming.
Latter, Nancy called the reporter back, and I came out and admitted my reversal on that bankruptcy question, and then I sat down and wrote an email to my 35 staff members at the time and came out of the bankruptcy closet to them.
The email took forever to write, and there was nothing easy about sharing my personal failure with my staff, friends, world, clients, and especially The Washington Post. All in all, a very uncomfortable experience.
A big part of why my bankruptcy was so painful was because I had not yet understood that my bankruptcy had been required by math and not a moral personal failure.
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When I ran into trouble and offered to pay my creditors what I could afford, they would not accept it. Later after my bankruptcy was over, I offered to repay my creditors, and they would not accept it. That was an educational experience I would later appreciate. I now thank American Express for that graduate class even if they still will not issue me another card again, ever.
Bankruptcy is really a collision of core beliefs and fundamental corporate realities. Nobody at the creditors was judging me. I was just another number in the bucket. The shame, fear, failure, and embarrassment I felt at the time were all internal. I was making myself feel those things.
As the years passed and I watched corporations file bankruptcy and be rewarded by higher stock prices because they took appropriate action to reorganize their finances. I slowly realized that bankruptcy can be the logical step if you take emotions out of the decision-making process.
Since I came out about my bankruptcy, my story has helped many, I am told.
So for those ignorant people that still insist that bankruptcy has lost its stigma, I say to you, “The hell it has.”
But the lesson I did learn from the entire situation is that on a personal level, my life has been much better by not having secrets and sharing my experience and dealing with the issue of being bankrupt has provided emotional relief from the intense sadness and failure I felt.