‘œCapitalism without bankruptcy is like Christianity without hell.’ ‘“ Frank Borman

During the spring and early summer of 1997, I finally realized that a series of bad decisions on my part had pushed me past the point of no return. Between debts I’d incurred running my sole proprietorship and the amount I owed on my deeply underwater mortgage, I owed more than I could reasonably repay in 11 years. Two attorneys, a CPA and a financial planner told me to file bankruptcy, and to file quickly.

I heard their advice, but felt that I had every obligation to pay my debts. Despite all the advice to the contrary, I made one last attempt to save myself. I researched and then contacted a local credit counseling firm to ask for help. During my initial telephone conversation, it became clear that they couldn’t help me. I simply didn’t earn enough money to cover my basic expenses and maintain a reasonable repayment plan. ‘œFile bankruptcy,’ they told me.

And so I did.

I was somewhat lucky in that my bankruptcy was filed long before the major reforms passed in 2005. The process was relatively easy. I paid my attorney a large fee (which I covered by simply not paying my mortgage one month) and made a list of all of my creditors. The list was very long because I was told to list every one of my customers to avoid the possibility of future claims or lawsuits. Once I handed over the list, I waited for what seemed like an eternity. It took my lawyer weeks to prepare my filing; in the end it was nearly two inches thick.

Although the process of filing for bankruptcy was relatively straightforward, the emotional impact was not. I had many sleepless nights, worrying about the future. I worried about where I would live, what people would think about me, and how it might impact both my current job and my future employment prospects. I’d read all the scary literature that declared bankruptcy is a ten year mistake. I felt guilty. I felt sad. I felt stupid. Like 85% of the people who have filed bankruptcy, it was something that I wanted to hide.

My worst moment was the day I had leave work for a few hours to appear in court. My attorney didn’t show up; instead, he sent another associate from his office. The associate wasn’t familiar with my case and the bankruptcy trustee couldn’t find a copy of my filing. As they rummaged around looking for it, I could plainly see it in the stack. All the other filings were only a few pages thick.

I sat and waited as they called the other bankrupt individuals and families forward. Each person called wore a grim expression. Many of the debtors tried not to cry as they answered the trustee’s questions about their income, debts, and their reasons for filing. The pain in the room was palpable, and it didn’t help that the trustee spoke to everyone in sharp tones, as if he felt they were gaming the system.

When it was my turn, I wasn’t exempted from the trustee’s whip-like tongue. He questioned me about my business, and when he learned that I was selling subscriptions to my online service he exclaimed, ‘œOh that’s great, take everyone’s money and then file for bankruptcy!’

I can’t recall when I’d been more publicly humiliated. My hearing only took a few minutes, and even though I didn’t escape the trustee’s distain, my bankruptcy was over. I walked out of the building feeling numb. I had to return to work, because I hadn’t thought to ask for the day off. I spent the rest of the afternoon shell shocked and unproductive. There was no victory that day. Although I felt a small degree of relief in knowing the bankruptcy was finished, I also felt as if I had a scarlet letter written upon my forehead.

My bankruptcy had a dramatic and negative impact on my emotional well-being and social life. Before I shut down my business and filed, I had a busy schedule. Post-bankruptcy, all my friends disappeared from my life. With the exception of family members, there isn’t a single person from that time with whom I’m still in regular contact. I’ve always wondered if my friends dumped me because they were embarrassed at their lack of knowing what to say, or if I suddenly had become in their minds a loser who was no longer worth knowing.

Although there were a lot of negatives to filing bankruptcy, there were also a few positives. The never-ending collection calls, which had gone on for months, stopped cold. Once I was freed from the crushing load of debt, I was able to begin contributing to my savings and my retirement accounts.

The bankruptcy was finished, but I still had much to do. I had to move out of my home, which I’d agreed to surrender. I had to find a place to live that would allow me to keep my dog and cat, and I had to figure out how to move all my possessions, since I no longer had any friends, and couldn’t afford a mover. It was a difficult, frightening and sleepless time, and it would be several months before it was completely over.

Lessons learned: My biggest mistake in filing bankruptcy was that I didn’t file sooner. Had I been willing to accept defeat earlier in the game, I would have had that much more of a head start on rebuilding my life. Although I strongly believe that bankruptcy is an option of last resort, it’s also important to recognize that some financial problems are not recoverable.

Next in series: Foreclosure

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