Tips for Overcoming the Emotional Costs of Bankruptcy (From Those Who’ve Done It)

by Dollar Stretcher Reader Contributors

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Facing bankruptcy and worried what others will think? Or maybe you feel guilty not paying back your debt? The emotional costs of bankruptcy can be just as hard to overcome as the debt itself. See if any of this advice from others who’ve been through the bankruptcy process can ease your worries.

Dear Gary,
We have determined that we are good candidates for bankruptcy, but I am having a hard time dealing with the guilt and shame of our financial actions. We are not deep in debt due to a hardship (no big medical bills and no lost jobs), but from poor spending habits. For a long time we have overspent, using our credit cards whenever we wanted to buy something. We finally reached that point where we can no longer make minimum monthly payments and have now gotten behind so much that even picking up extra part-time work is not getting things paid on time. I feel as if we don’t deserve an easy out like bankruptcy. We spent the money, and I feel obligated to pay it all back.

Would anyone else who has faced a similar situation and used bankruptcy as a solution please tell me whether you feel you made the right choice or do you think, in hindsight, that you would have made a different choice? Bankruptcy might offer us some financial relief, but I don’t think it will relieve me of the shame and embarrassment of getting ourselves into this mess. How do you overcome the emotional costs of bankruptcy? Is it easy for people to find out someone has filed bankruptcy? What do we tell them? My husband says he is fine with our decision and this is the reason they have bankruptcy. He sees no other way out that doesn’t end with us losing everything, including our home. Any advice?

How To Overcome the Emotional Costs of Bankruptcy When There’s No Other Solution

Nothing about bankruptcy is easy or pleasant. It’s a difficult thing to go through, but if there’s no other reasonable solution, it can be a real lifesaver.

We had a combination of medical bills, phone bills, and credit card debt that had gotten too far out of hand to dig ourselves out of with our small, limited income. Our case was fairly straightforward, so we did it ourselves with the help of a local free legal aid bankruptcy assistance class and the Nolo Press book on bankruptcy (highly recommended). Of course, if you have a more complex case, it would be wise to consult a bankruptcy attorney. (See also Is it Possible for a Lawyer to Get You Out of Debt?)

The moment you file, which stops further creditor action, you can begin to live again as you did before the debt. Paying only your current bills leaves breathing room to save some “cushion” money without those crippling debt repayments hanging over your head.

It was a bit intimidating, but everything went smoothly. The trustee at our meeting asked if we’d used an attorney, because she was so impressed by how well our paperwork was prepared.

A few weeks after our meeting, we received the final letter from the court, stating that all of our dischargeable debts were discharged, and I just can’t express the overwhelming sense of relief it brought. A heavy, oppressive weight was lifted off our shoulders.

I’m not proud of our debt. Much of it was, frankly, bad choices on our part. But, I do take a certain pride in how we took control of a difficult situation, digging in, doing the research and hard work to properly prepare and file the paperwork, courageously facing the court trustee at the meeting, and learning from the whole experience how to better manage our money and avoid future debt.

One thing the Nolo Press book explained, which helped with feelings of guilt, was the fact that forgiveness of debt has been a part of civilized societies since Biblical times, as a safety net to keep debtors from “falling on their own swords” out of despair. We’re human and all make mistakes, and there’s nothing wrong with seeking out perfectly legal help when we find ourselves over our heads.

It was a difficult, eye-opening journey, but we made it through. You can too if you make the decision that bankruptcy is your best option. Best wishes!
Anonymous in California

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Keep Your Bankruptcy Private

If you are so far behind that even an extra part-time job will not pay your bills, you can start over using bankruptcy. Thousands of other people have done this, and you are not going to shame them by trying to pay back every penny on your own credit cards. The costs of bad credit risks are built into the interest rates on credit cards. It’s not the path you would wish to take, but it is the shortest way out of trouble.

Any shame and embarrassment you describe is only felt by you. Don’t talk about filing for bankruptcy to anyone but your husband. Do not chat about it with your friends or coworkers. Do not discuss it with your family members! It is none of their business. They don’t pay your bills or manage your budget. You wouldn’t tell them about “embarrassing” medical conditions. Just leave it out of all conversations.

Treat it as if you went to a confessional and unburdened yourself to a priest. You were absolved, and your personal penance is to behave responsibly from now on.

The Beginning of Something Better To Come

My husband and I made the decision to file for bankruptcy in 2014. We had made a poor decision to trust someone early on in our marriage and it affected us financially in a very huge way. We prayed long and hard and talked to our pastor before making the decision. Am I glad we made the decision? Yes and no. I have struggled with my pride over it (as most people do), but I also have learned to take this bump in the road and think about what I have learned from the situation and how can it help me to be a better person.

Yes, we are in bankruptcy. Yes, it did help to eliminate most of our debts. But, I started to think about how our financial situation once we are out of bankruptcy. We would not be in debt, but we also wouldn’t be bringing anything else in to help with our finances. We are a one-income family with two small children. So, I decided to go back to school. By the time we are out of bankruptcy, I will have my BSN and will be bringing in a great income and that will help to jump start our financial future. It is hard right now, but it will be worth it in the end.

It’s kind of like living as a Christian. Do we deserve forgiveness? No, but it’s offered freely. Do we deserve a bright future? No, but through changing our mindset and letting the past wash away (like our sin), we can have hope for a better future. Bankruptcy is not always the answer, but it can help in the right circumstances. Just don’t let bankruptcy be the end. Let it be the beginning for something better to come.

I understand the feelings of guilt that you have. I have often felt this way myself, but working towards something better for our future has shown me that it’s not out of laziness or lack of motivation that got us where we are. Many people end up in the same situation and it’s for lack of knowledge of how to handle money. I know that when we filed bankruptcy, we were required to complete so many courses online (as a couple) for financial awareness and how to handle our money better. I encourage you to check into taking financial counseling whether or not you decide to file bankruptcy. It will help tremendously. If you do decide to file, you’ll be surprised the relief that you’ll feel from the burden of trying to play catch up all the time. I hope the best for you and your family.

Filing Bankruptcy Is Not The End of the World

I have the same exact story regarding the accumulation of the debt, and the final acknowledgement that noble efforts were in vain. I took the brunt of the bankruptcy on my own. All the credit cards were in my name because my spouse had poor credit. How’s that for irony? It was devastating, certainly humbling, and disappointing that I really had no other options. I was embarrassed about the greediness of our lifestyle.

However, the act of filing itself was actually quite positive. The paperwork was straightforward, and the court assigned a finance and budgeting class. The class teachers were optimistic and had a “pick yourself up now and keep going” kind of attitude. I learned a lot from the course, and I learned it wasn’t the end of the world. I filed several years ago, and it’s now off my record. I still do not have a credit card. As for telling people, who needs to know? The only way anyone would find this out is if they did a credit background check on you.

Enjoy a Brighter Future After Bankruptcy

My husband and I had to file for bankruptcy many years ago under very similar circumstances as yours. To this day, although my husband has passed away, I still think that was the very best thing we could have done. My husband felt the same way. We worked endless hours (often two jobs) and almost missed what was really important to us. We did feel guilty for a long time, but as we started to recover financially and see that was the best decision for us, we began to feel better. We scaled down further afterwards, sold our house in the city, and bought a nice little property and a mobile home of which I still live in. We also bought two older vehicles, one of which I’ve had for 13 years. I have no car payments, and it is still in good shape. In hindsight, the bankruptcy started us to think long term where before we only thought of the moment.

As for telling people, it is no one’s business. We both told people when they asked that we never discuss our financial situation. If they continued to ask, we would tell them the same thing. We eventually realized that they were not people that we wanted to spend a great deal of time with and we eventually went our separate ways. I also have retired mostly due to health issues and live on a fixed income. I am certain that if we had not filed for bankruptcy then, I would have a very difficult existence now. I have learned to live very well on very little while remaining debt free. I don’t go without and I stay debt free. I still never discuss my financial situation with anyone. I will tell them how to live frugally if they want to know. I wish you good luck.

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Consider Another Option

I have worked for bankruptcy attorneys in the past, and you are not alone. We had several clients who went through the process, so they could get on a realistic budget. However, they also kept a list of all the debts that were wiped out. Then when they were back on their feet, they systematically paid every one of them back. They were not legally obligated to do that after the debts were erased, but they felt it was the right thing to do. And, yes, bankruptcy is public record, so anyone who knows where to look can find out that you filed. Most people don’t randomly go looking for that information, but you will want to decide with your husband what you are going to say to people if they ask about it, so you can avoid any awkwardness.
Lisa C

Turn Emotional Costs of Bankruptcy Into Precipice for Change

The best way to handle this is to commit to changes. Make changes in your spending habits and changes in how you view what you need versus what you want. Just generally take stock of your life. It’s never too early or too late to make those changes. The pain of having to make that decision will fade with every positive change you’ve made toward your financial health. I speak from experience. I was a legal secretary for an attorney that handled bankruptcy claims. That really opened my eyes and motivated the changes I made in my own habits.

Crippling Emotional Costs in NOT Filing Bankruptcy

I’m actually answering you from the exact opposite side of that coin. My husband and I ended up in the same situation and chose NOT to move forward with bankruptcy due to the emotional costs of bankruptcy. This was the worst decision ever. It took almost 20 years to get back to a semblance of normalcy, where we weren’t getting nasty phone calls from debt collectors. None of them appreciated that we were working so hard to pay what we owed and more than once said so. The original companies didn’t care, as they had already sold the debt to the collectors. The pressure you feel to pay those bills continues to get worse and worse and you start blaming each other for “wasting” so much money both in the past and in the present. Yes, it’s embarrassing, but you’re doing it right. You’re telling the truth about how you got there and you sure aren’t going to let it happen again.

Filing Bankruptcy Does Not Make You a Bad Person

I know this is a difficult time, but you have to factor your age in your final decision to file bankruptcy. If you are near or over 50, it is unlikely you will be able to pay back all of your debt and fund an adequate retirement. The best thing you can do is to go ahead and file. When you reach a comfortable stage in your financial life, perhaps you could help out a good charity or even someone local through social services. A family having hard times would certainly appreciate you helping them out and many times only a modest amount extra each month can make a big difference in a struggling family’s condition. This would help you to feel as if you are giving back to the world and help you to realize that you are not a bad person for having to file bankruptcy.

It’s a Bought Lesson

This is what I call a bought lesson. Yes, there is shame, guilt, etc., but you will get over it. Filing takes an emotional burden off your back and you will learn from your mistake. Bankruptcy seems like an easy out, but it is not because it will take years of discipline to make sure it does not happen again. I suggest reading finance books, anything by Mary Hunt, and the Dollar Stretcher website in order to not have to walk across that bridge ever again.

Reviewed August 2023

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