Today I happened to overhear part of a radio talk show where a distraught and heavily debt burdened woman called in, and said that it looked like bankruptcy was her only option. The host of the radio show, who has probably never endured what she had to, actually made her feel guilty about even considering bankruptcy.
Non-Bankrupt People Just Don’t Understand
This is truly a case of having to “walk a mile in someone else’s shoes” to understand where they’re coming from. People who have never had to endure the stress of never-ending nasty phone calls and letters from collection agencies and other creditors demanding money you just don’t have, or could reasonably expect to pay, it’s hard to empathize with them. It’s not like we’re being irresponsible and just feel like stiffing everyone for money we owe them.
Good Reasons For Declaring Bankruptcy
Perhaps we fell into the lure of easy credit, or took credit card limit increases as they were offered. Maybe there was a job loss, pay cut or small business failure. Outrageously high late fees and interest charges have a way of making debts skyrocket to unmanageable limits quite quickly. For low income people and/or folks living pay cheque to pay cheque, just falling one or two months behind can quickly make debt go out of control.
Even with bankruptcy among consumers becoming more and more common in Canada, some people feel really badly about having discharged their debts by going bankrupt. Worse yet (or perhaps more likely that), other people make them feel guilty about having filed for bankruptcy. It’s not fair to paint everyone with the same brush. Some people could have had a death in the family, a job loss, sudden drop in income, medical issues or any other combination of unfortunate circumstances.
You’re Not A Bad Person If You Went Bankrupt
I believe most people are good. Perhaps some people may intentionally wrack up a who lot of unsecured debt with the intention of going bankrupt and never paying it back, but I believe the majority of people do the best they can do avoid bankruptcy, leaving it as a last resort option. Most people who have filed for bankruptcy, like myself, are good people who just got in over their heads in debt. Sure, in retrospect, circumstances and events leading up to financial distress could have been avoided. So could the sinking of the Titanic. Anyways, what’s done is done and something needs to happen to move on – regardless of the degree of responsibility, or irresponsibility.
Of course, there are some people who just live way beyond their means and take vacations on credit cards, buy expensive cars, live in a house they can’t afford and furnish it with furniture on credit that they can’t afford. I was not one of those. I lived modestly, bought used furniture whenever possible, bought clothes on sale or at thrift shops when my old clothes wore out, drove a new but low priced car and never went on vacation. But I still managed to become a victim of debt overload and had to file for bankruptcy.
I Struggled With The Idea Of Bankruptcy Too
I speak from personal experience when I say that bankruptcy is not something that most people take lightly or do on a whim. Back in 2007, I struggled for 6 months with the idea of filing for bankruptcy before actually doing it. A sudden huge drop in income, rapidly mounting debts due to interest and late charges coupled with never-ending phone calls from collection agencies and credit card companies left me no choice.
For 16 years (almost half my life back then at age 34), I had been able to handle paying off small debts and keep up with minimum payments on others, even obtaining a bit of new credit now and then, like a car lease or a credit card limit increase. But then, almost overnight, things went downhill as my small business took a nosedive with the economy in late 2007.
One month, I realized all that I could afford to put towards debt repayment was $150 – quite a stretch at time considering my low income back then. Instead of dividing it up between 20 creditors, I decided to make one decent sized payment to a single company. I paid $150 on my MasterCard and discovered, to my horror, on my next statement that I had accrued $200 in interest and over-the-limit charges (I had been charging food and other necessities on the card, no luxuries). That payment was like the proverbial “drop in the bucket.” The payment I made was quite a sacrifice because at the time I has just been laid off from my only source of income, a minimum wage part time job where I made about $800 a month driving a school bus. I took that job in haste after I realized I was digging myself deeper into debt trying to keep a small business afloat.
I realized I needed money just to survive, let alone pay off my debt, so I got rid of my nice new (but modest) leased car, went to the welfare office in my old rusted out 1984 Toyota truck to apply for welfare and then to the food bank to get some food while they processed my application. Over the next few weeks, I saved up what I could for the bankruptcy filing fee, drove down to the office of a Trustee in Bankruptcy on my last tank of gas and with a heavy heart, filed for bankruptcy on September 11, 2007.
I really wanted to pay off my debts and avoid having a bankruptcy on my credit reports for the next 7 years. Previously, I had gone to a debt counseling program to ask about a debt repayment program or a consumer proposal. They told me if I put 100% of my income from my job (prior to being laid off), at it’s then current level, towards my debt for 5 years, with no more interest or late payment charges, it would just barely pay it off. And I’d still have a bad credit rating for another 6 years from that date – in other words for the next 11 years or until 2018 when I’d be 45 years old. I felt like such a failure and seriously thought about just driving off a bridge and ending it all. At that point, bankruptcy became the only realistic choice.
People Can Do Drastic Or Stupid Things In Tough Times
For some people, the stress and depression is too much and they resort to suicide, or stage an accident so it doesn’t look like they took their own life. I wouldn’t be totally honest with you if I didn’t admit that those thoughts crossed my mind just before I went bankrupt. Luckily I, and many others chose the lesser of two evils and filed for bankruptcy. When I filed for bankruptcy, a huge weight had been lifted off my shoulders – even more the day I got my Certificate of Discharge 9 months later. But don’t worry – that’s just the beginning point in the struggle up the road to life after bankruptcy.
There’s the guilt we have to live with, especially if some of the debts were to people or small businesses we personally knew, as in my case. When you file for bankruptcy in Canada – it’s all or nothing. Every debt must be included and every credit card must be surrendered, even if it has a zero balance. And with the tough new credit requirements, it’s not easy get any type of credit for 6 years after the bankruptcy discharge. That includes one of the basic life essentials: shelter. Yes, even finding a rental apartment will prove challenging. So if someone on the outside thinks that people wrack up debt and just don’t feel like paying it, then go bankrupt and go living happily ever after as if nothing had happened, they’re dead wrong.
If you’ve filed for bankruptcy, you’re not alone. Every year, tens of thousands of consumers go bankrupt in Canada. It’s not something to be proud of, as I’m sure most people considered bankruptcy as a last option. Maybe it was through no fault of their own, or maybe it was due to negligence or outright irresponsibility. Regardless of the reason, as long as you didn’t devise a plan to wrack up as much debt as possible with full intentions to go bankrupt and avoid paying for it, you don’t need to feel guilty.
Did bankruptcy help restore your mental sanity, prevent suicide and/or just help you get on with your life (albeit with a tarnished credit report, but less or no debt)? It did for me! Short of winning the lottery or stumbling upon a surprise inheritance, there was no way I would have been able to even make a dent in my debt back in 2007 and break the vicious cycle to move on with my life. I shudder to think of where I’d be now. Of course, nearly 3 years later, I’m still in recovery mode, but life is so much better now and can only improve. I’ve learned so much and am grateful for the wake-up call bankruptcy gave me before things got worse.