Walt Disney in 1923. Henry Ford in 1901. H.J. Heinz in 1875. Abraham Lincoln in 1833. What do they all have in common? Each one of them - wildly successful and wealthy individuals - survived bankruptcy.
Bankruptcy is not the end of days. It does not cancel out any future success. Far from it. And while the details may differ country to country, bankruptcy is essentially an inability to repay the debts owed to creditors. It should never be entered into lightly, but nor is it impossible to recover from the declaration.
Stop Feeling Like a Failure
Having to declare bankruptcy leaves most people feeling like a failure. It is a reasonable reaction, but one that serves no purpose. Studies show that most people face a major financial upheaval or issue that could lead to bankruptcy once every ten years, so the problem is a lot more common than you might think. You need to take responsibility, yes, but don’t let it consume you.
It might be impossible to navigate the legal and psychological obstacles that come with bankruptcy, so don’t try and do it alone. There are non-profit and charitable organizations in virtually every country (see a few links below) that offer advice, legal services, and counseling to work through it all. Debtors Anonymous is another useful resource (even though they typically frown on bankruptcy, believing it is not a solution, just a bandaid). No matter where you find it, or who you turn to, find help and assistance.
Change Your Attitude and Habits About Money
This step is crucial. You are at least partially responsible for your problems (if not completely), and you need to recognize that. Rarely (although not never) is bankruptcy completely not our fault...even a business failure could usually have been avoided - and financial ramifications lessened - with proper planning and contingency plans.
After bankruptcy, you need to learn to live well within your means. At its most elementary, that means never spending more than you’re bringing in during a period of time (weekly, bi-weekly, or monthly). Reduce expenses: rent, car, entertainment, shopping, eating out, and so forth. You need to save for emergencies and invest for your retirement. No matter how much income you have, there is always enough to do that, even if only a little (the cardinal rule when it comes to saving and investing? Even a little is better than none at all).
Work Towards Fixing Your Financial Life
Bankruptcy does not leave you with nothing. It can lessen the financial burden, and it certainly reduces the stress of being in debt, but again, it is NOT something that should be entered into lightly. Bankruptcy stays with you (and on your record) for years. Speak to a credit counselor or bankruptcy lawyer in your country to see if bankruptcy is really the best option (there are other avenues you could explore).
For some, though, bankruptcy is the only solution. If so, it’s important to accept it, move on, and start working towards rebuilding your financial life. You’ll likely be assigned a counselor or trustee, and you’ll get together monthly (or more frequently) to evaluate how things are going, pay off bills, and try to correct as much as possible. You may have to repay some creditors, while others may be written off (some things like child support and your mortgage are rarely if ever wiped clean). It all depends on your particular situation. Little by little, your debt will be eliminated and/or removed, and you essentially have a clean slate to start over.
Just don’t make the same mistakes again.
Other Useful Links
Bankruptcy is serious. Afterwards, you need to examine the root cause of your financial issues. Are you truly blameless? Take a serious look at your relationship with money. Is it positive? Do you shop or travel outside of your means as a way to deal with depression, dissatisfaction, or unhappiness elsewhere in your life? These are all red flags...ignore the root of the problem, and you could find yourself in serious financial trouble again before you know it (you do not want to file for bankruptcy twice!).
Photo Credit: Chris Potter
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