3 Surprising Advantages Declaring Bankruptcy Gave Me After I Realized I Was Broke
By: Mallory Joy
Tags: Money Management, Debt, Finance, Money, Life Lessons

3 Surprising Advantages Declaring Bankruptcy Gave Me After I Realized I Was Broke

And how my 28 year old self got a new lease on life.

Photo by Alice Pasqual on Unsplash

If you haven’t taken a look at your bank account, you need to do it immediately.

I did. And I finally realized the hard truth. I was broke.

It was a difficult pill to swallow.

I stared the growing pile of credit card bills, medical bills, student loan payments, and car payments in the face… and threw my hands up in defeat.

I wasn’t going to make it. And I knew it.

Worse yet, I was pulling my husband down with me. If our marriage was going to survive, I had to do something.

I really didn’t want to, but I quickly realized that bankruptcy was my only option.

I quailed at the thought. I really was embarrassed. I was in my late 20s, facing an admission that I was flat broke to my husband, my attorney, the judge and trustee who would be handling my case. I was a hot mess.

At the end of the day, I survived.

It might be crazy to think that declaring bankruptcy (in my 20s, no less) could have so many advantages, but stick with me, here’s a few it gave me…

1. I got a fresh start

I never forget the relief I felt as I began the bankruptcy process. There finally felt like there was light at the end of a very long, very dark tunnel.

Debt and financial woes have this way of becoming a sort of boa constrictor, slowly suffocating you to death.

I began to try and tackle my debt problem. A couple years later, I found my debt amount the same or even slightly above what it had been. The reason? Interest rates.

My interest rates were killing me.

While I would throw $300 a month at each credit card, the interest rates were so high, all but maybe $10 would go toward the interest every month. I wasn’t making a dent in the actual principle amount I owed.

Bankruptcy is the fresh start, the do-over that a person needs when there simply is no way out and no way forward. It was the permission I needed to acknowledge I had failed in the personal finance department and move on with my life.

For most of us, acknowledging defeat is humiliating.

However, acknowledging defeat can also be incredibly healthy if done the right way. Drowning your sorrows of defeat at the bottom of a bottle probably isn’t the best thing. Nor is going on a shopping spree, trying to suppress the growing truth (and your growing credit card debt).

Rather, acknowledging defeat in this case meant turning for someone else for help. I went to an attorney who helped me look at my options. For most bankruptcy attorneys, they offer free counseling sessions.

It’s a great opportunity to get feedback and see all your cards on the table, even if it is the most embarrassing hand you’ve ever played.

Admitting I was at the end of the road and that I needed help allowed me to get a fresh start. Having my debt cleared via paying back some of my debt slowly over five years has allowed me to breathe a little easier.

I get to start over, and that, in itself, is empowering.

2. I was forced to be really honest with myself

Nothing is more jarring or more humbling than realizing that YOU yourself are the reason you’re stuck in the mess you find yourself in.

Bankruptcy and talking with my attorney made me be really honest with myself. I had to account for all the money I was spending (money I really didn’t have, but spent anyway). I had to own up to the fact that I was not keeping track of the budget very well.

I had to show where my money went for the last six months of my life. Account for every dime I spent and prove to the judge and the trustee that the money I spent made sense. Some of those charges made more sense than others.

Those credit card bills? Probably the result of that pair of shoes I didn’t need or that vacation I probably shouldn’t have taken at the time.

Those medical debts however? Necessary. It helped me realize that there should be priorities when it comes to money and some debt is just simply unavoidable, especially on a teacher salary.

If you ever want to be really honest with yourself (read: forced to be honest), declare bankruptcy.

3. I am learning to live within my income

After bankruptcy, life is different. It’s not just the fact that I’m not living quite as close to paycheck to paycheck. It’s more than that.

My mindset about money is completely different.

Before bankruptcy, I spent without thinking. I just shoved that little plastic card into the machine, not considering if I had enough to cover the balance, not considering if I actually NEEDED what I was purchasing.

It’s funny to realize what are needs compared to wants.

My husband now helps keep me accountable as well. Most things I purchase he trusts me with, but we now communicate (which should be happening in a healthy marriage anyway…) about any purchase that is made over $50 (that isn’t groceries). It’s a great way to keep me honest, and it helps him, the budgeter, know where our money is going.

I’m now incredibly good at figuring out what is in the budget and how to live within our means.