10 Things Bankruptcy Has Taught Me

My husband and I just filed bankruptcy for the second time…because we didn’t get it right the first time around.  We were constantly playing catch-up and eventually just let our first bankruptcy get dismissed.  So we filed again.

Bankruptcy is not a fun place to be in.  It’s rather embarrassing to be honest.  It announces to the world that we suck with money.

I grew up poor.  My husband grew up pretty comfortably.  My parents were complete opposites where money was concerned.  My father lived simply, paid child support, and rarely splurged on anything (that I can tell).  My mom and I lived simply until she finished college and remarried.  We still weren’t middle class, but we didn’t have a house payment and my mom worked full time.  I didn’t lack anything.  If we had money, we spent it.  If we didn’t have money, we didn’t spend it.  And we helped family with money when they needed it and we had it, and vice versa.  That was just the way I grew up.

I resented my father’s way of dealing with money because I didn’t think he used enough of it on me (this changed once I reached adulthood, but as a teenager, it was certainly the way I felt).

My husband says his parents weren’t good with money either, but his father was an attorney so they were still really comfortable.

As adults, my husband and I had different experiences.  He married young and had to support his wife and three boys.  I took out a ridiculous amount of student loans, continued to spend when I had money, yet managed to live in New York City while paying my monthly expenses, student loans, and debt.

When we got married, he brought all of his marital debt and a small (compared to mine) student loan.  I brought student loan debt and credit card debt, as well a mortgage.  We bought the house in my name about two months before we got married.  We got an insane deal on a foreclosed home (that didn’t look like a foreclosed home; all the doorknobs were there, etc) and ended up with a mortgage to envy.

We were in the perfect position to get debt free and save money.

But we didn’t.

As we made more money, we spent it.  And when things got hard, we spent money we didn’t have in order to survive because we didn’t have savings.  We robbed Peter to pay Paul.

We refinanced our mortgage in order to consolidate some of our debt.

We bought two brand new cars.

And then my husband no longer had his job.  And I was no longer teaching as an adjunct.  He worked, but it wasn’t at the same salary as before.  And I lost almost $10K in income.

Soon we were behind on everything.  Cars, house, credit cards.

Things are better now.  We both have good paying jobs.  We aren’t playing catch-up, but we are on a tighter budget.  We have hope for the future.  We’re on a 5 year plan, but we won’t be completely debt free in 5 years.  We will still have to take care of our student loans and our mortgage, but everything else will be taken care of.

Through this entire process (yes, I know it’s still ongoing), I’ve learned a lot.

  1. It’s important to be on the same page as your spouse. Learn to communicate about money.  Budget.  It sucks (it really sucks), but it’s necessary. Talk about how you want/need to spend each paycheck as well as any extra money that might be coming your way (bonuses, tax refunds, etc).
  2. Learn to say no to each other. We bought a ridiculously expensive cookware set (it was titanium) because we both thought the other one really wanted it.  They’re great.  Except that we still ended up buying a nonstick skillet from Walmart so we could easily cook eggs.  This is also the reason we have two Dyson vacuums and we bought two brand new cars, among other things.
  3. Avoid revenge spending.  It’s when one of you splurges without telling the other, so the other spends money just because it’s fair.  Don’t do that.
  4. Money problems make you overweight.  Okay, so that’s not a fact, but I do believe there is a strong correlation.  And let me tell you, not one person filing for bankruptcy at the court the same day as us was a healthy weight.  They were all overweight (including us).  Financial problems affect every area of your life.  If your finances are out of balance, it’s likely the rest of your life will be out of balance, too.
  5. More people than you realize have filed bankruptcy, or had serious financial situations.  You’re not alone.  So don’t be afraid to ask for help.
  6. Bankruptcy is only a life failure if you choose not to learn from it.  Use this as an opportunity for a fresh start and a chance to grow.
  7. Consolidation doesn’t solve anything.  It’s a band-aid.  Changing spending habits is what changes things.
  8. An emergency fund is essential.  Life doesn’t care that you’re in debt or on a budget.  Your microwave will still die, your car will still get a flat, your air conditioner will still go out.  Without that emergency fund, you’re scrambling to find the money to take care of things, which often leaves other bills unpaid.
  9. Take it a day at a time.  Bankruptcy is a stressful process.  Some days you’ll feel hopeful about your financial future, and sometimes you’ll feel overwhelmed by the situation you’re in.  Own each experience as it comes and remember to cut yourself some slack on those bad days.
  10. Find a system.  I don’t care what system you use, but you need to find one that works for you.  Just like you need a lifestyle change instead of a diet, you need a financial system and not just a budget.  What I mean by that, is that you need to figure out a system of financial habits that works for you and your family and then stick to it.  There are several out there (we use Dave Ramsey’s system), so pick one, or mix and match, but choose something.

Check out the Reading List and the Financial Factor for more resources.