Secrets of Surviving Bankruptcy
In 2002, I was forced to declare personal bankruptcy. OK, "forced" may not be entirely accurate, but my lawyer advised me that the only way to get out from under an $80,000 lien on my personal bank account was to declare bankruptcy.
Why did I have an $80,000 lien on my personal bank account? Because a former business partner defaulted on his company's line of credit, and I was the only one dumb enough to personally guarantee the loan. So dumb, in fact, that when he handed me the papers to sign years earlier, I didn't even bother to look at what I was signing, trusting that everything was in order because he said it was.
I didn't know it then, but that blind trust and business ignorance put me on a path to bankruptcy court.
The shame of having to declare bankruptcy was crippling. I tried to block it out of my head, but every time I tried to do anything involving a bank, I was shamed all over again.
"I think the major emotion [I've felt] has been that of failure," says Robin Hardy, whose company The Moosey Group Inc. taught adults and children financial literacy. "The creditors really make you feel like you failed, you are a loser and you are worthless."
Hardy explained that the adults she worked with expected the services to be free and, while working with kids was rewarding, the youth programs were more of a community service--one her company couldn't afford. Income had come to a standstill.
She says overcoming feelings of failure was a challenge.
"That was a huge process that took [many] affirmations and deep soul searching to overcome," Hardy says. "We all need to understand we did not fail because we went bankrupt and do not own it personally . . . I did not plan to do a [bankruptcy]. I really believed we could come up with maybe grant money to continue the program."
Hardy filed for business bankruptcy last fall and is in the process of filing personal bankruptcy this year.
From a business standpoint, she says dealing with bankruptcy made her explore who she really is and embrace the opportunity to reinvent herself.
"I worked with a coach that helped me move through the negative mind-set of failure to the positive mind-set of reinvention," Hardy says. "Plus, the [bankruptcy] attorney shared great stories of multimillionaires that had rough starts leading to bankruptcy yet in the reinvention created a more powerful business opportunity, so why can't I, and why can't each person moving through this part of their life?"
While people consider bankruptcy for many reasons, not everyone chooses that path. Author and public speaker Diane Darling considered declaring bankruptcy in late 2002.
"I was trying to get [my business] Effective Networking off the ground, I had debts from a business that didn't make it, and too much was in my own name," explains Darling, who also got sidetracked by other projects that weren't generating income.
Darling went to a Debtors Anonymous meeting.
"I'm not a spender per se; it was more that I am an under-earner," she says. "They (at Debtors Anonymous) said that rarely does declaring bankruptcy fix the real problem, which is more emotional/psychological. In retrospect I wish I had met with a bankruptcy lawyer and looked into it a bit more. It's been a struggle."
For Darling, anger, humiliation, frustration and depression were present as she moved through the process of considering bankruptcy. She also worried that her professional image was too visible and was afraid of what people might think of her if she declared bankruptcy.
I can understand Darling's fears. A few years before I began the process of declaring bankruptcy, I was interviewed for a documentary film about powerful and inspirational women. When I got in touch with the producer a year later to see how the project was going, she said I was taken out of the film. I asked why.
"Well, I heard you went bankrupt. So you can't be in the film," she snapped. At that point, I had recently started and shut down a second internet company because of the 2000 market bust but was nowhere near bankruptcy. Knowing someone else thought I was bankrupt was painful and embarrassing.
Darling admits she actually avoided bankruptcy due to "sheer will and naivete."
Recalls Darling, "I did go to a credit counselor who said I had to give up my apartment. I avoided it for a while--just had too much else to think about. Finally an opportunity came to move out and decrease my costs. It was the first of nine moves from 2003 to 2007."
Avoiding the Abyss
Attorney Edward E. Neiger, founding partner of Neiger LLP, says among the most common reasons he's seen women declare bankruptcy is the dishonesty of a significant other.
Says Neiger, "In one case, a woman's husband convinced her to put the home in her name only. When the relationship went sour, she was stuck with the mortgage burden. In another case, the woman forgot to take her fiancÃ©e off her credit card. After she broke off the engagement, she was forced to file for bankruptcy because of the bills he racked up."
Other than that, says Neiger, other common reasons include job loss and the bad economy.
Neiger says many women he sees have had to file for personal bankruptcy after going through a divorce if their current job is not enough to sustain their debt. On the business side, he says he hasn't seen much difference between businessmen and businesswomen in their reasons for declaring bankruptcy.
It takes time to rebuild your credit after bankruptcy. Most experts say about seven years.
Fast Forward . . .
Darling now has two housemates, paid off her debt last spring and is saving for a down payment on a place. Her business is OK, and she says she can do well when she puts her energies into it.
Today, Robin Hardy is a business consultant, sales trainer and motivational expert. She feels like she is finally following her passion.
Me? I married a wonderful man with impeccable credit who "floated" me for the past few years, adding my name onto everything he could--car, credit card, title of our house--hoping it would help boost my financial snapshot. Over the past few years, I've also learned how toxic my relationship to money had been. I recognized my tendency to ignore the fine print and important details than dig in and understand financial details. I realized if I didn't change that, I'd bring my family down into a black hole of debt.
As a couple, we are now living debt-free, only using credit cards for emergencies and paying them off in full, and I'm continuing to identify and break bad financial habits. I'm six years post-bankruptcy and recently had a major financial breakthrough when a new corporate bank provided me with a line of credit in my own name. My business is thriving.
I'm not entirely out from under the financial mess of my former company. Luckily, I now have a banker who believes in me (not to mention my husband). And I finally believe in myself.