How has bankruptcy affected your life?
I found out I was pregnant a week in-between insurance coverages. It turned out my pregnancy was high risk and I was out of work for six months. Medical bills kept piling up and I kept telling the creditors if they would work with me, I could pay them back, but they would only wait so long, so I had no other choice. Bankruptcy is a very degrading experience. It makes you feel lower than the low, like you are riding on the backs of other Americans. In my case, there was no choice. The guilt is overwhelming when you're going through it.
I filed bankruptcy last year due almost exclusively to credit card debt I racked up as a college student and young professional. It was amazing how after just a few missed payments when I was unemployed, interest rates skyrocketed and I found myself trying to make minimum payments well beyond my means. I contacted a credit counseling service and worked out a plan that would have been incredibly tight and would have forced me to work a second job (mind you, I had just found a first job). When I spoke with a collection agency that was handling one of my overdue credit cards and told them about the credit counseling plan, they said it was unacceptable and too late for that. "_____ Bank intends to sue you," were the stiff, rifling words of the collection agent.
Any guilt and shame I felt turned quickly to anger and frustration when I looked at the usurious 30 percent interest rates I was now being charged. I decided to file Chapter 7 bankruptcy after my lawyer and I reviewed my income relative to expenses. I did so several months before the law changed, though I don't think the new law would have made a difference in the outcome of my case. I am now debt-free except for some manageable student loans and I am headed to graduate school this fall.
What I have taken away from the bankruptcy process is more than just a fresh financial start. I have taken away an understanding of just how viciously lenders pursue profits, and I will never again apply for or use a credit card. While they have a right to charge interest, especially if payments are late, interest rates upwards of 30 percent are outright ridiculous. There's no reasonable way for someone to get out from under that, and there's no way that the cost of my delinquency to the companies equated with such utter usury. While I may sound like I am blindly jumping on the anti-corporate bandwagon, I spent a lot of time researching and re-thinking what is important in my life and what I value in terms of work, possessions, and other defining aspects of culture. I have decided that it's much better to live without credit. I'd rather not contribute to a system that lines the pockets of wealthy corporations, and I prefer to save on my own terms and scrimp when I need to. If I had borrowed money from a family member or failed to pay someone who would actually suffer tangible negative consequences from my delinquency (like a small town doctor), I'd feel bad about it. But much like Tom in your documentary, I know that I am just a number to the credit card companies who charged me insane amounts of interest after a few late payments, and now my former debt is just written off without any substantial detriment to the companies. I have a chance to pursue a better life through grad school (not just financially but emotionally and intellectually) and the credit card companies are no worse off than they were before. That's what happens when the system gets so big.
There's also an institutionalized kind of cultural discrimination that cannot be ignored in the American debt arena. I grew up in a poor, blue-collar family and went (mostly on scholarship) to a good east-coast private college. Most of my classmates were children of wealthy businesspeople and lawyers, and I struggled to keep up with the spending habits of my new peers, which is how I began racking up debt. While you can argue that people are ultimately, solely in control of their own financial choices, there were and are structural inequalities in place that smart, 20-year-old white kids from disadvantaged backgrounds (like me) can't overcome, even at good colleges. Knowing this, I can't even imagine what the social pressures are for people who grew up with even more structural inequalities in their way - racism, sexism, blighted urban neighborhoods, and more limited opportunities for education. I consider myself lucky to have finally recognized some of the many forces at work with consumerism, corporate greed, and American culture. Bankruptcy helped lead to those realizations, and it helped me change my life for the better.
I am a manager at Lutheran Social Service Financial Counseling in Minnesota and wanted to add a perspective to your very good piece on the new bankruptcy reality: the value of the required bankruptcy counseling (1:1 session pre-filing) and bankruptcy education (two-hour class pre-discharge) under the new law. In our experience as an EOUST-approved provider, people are being shown alternatives and consequences for the first time ever, before they can file. While most still choose to file, they at least have a plan to rebuild their financial lives and avoid having to file again. In the past, many filers filed again within a few years because no one helped them fix the broken budgets, uninsured status, and debting habits that created the problem.
I filed in 1990, when I was laid off from my civil service job and had to take a job paying half. I also filed in 2001 when I had just started a new job and was diagnosed with cancer in order to reorganize my household and almost $300,000 in medical bills (no medical insurance).
I was on the road twice monthly as a consultant in the '80s and built up golden credit by charging rental cars and hotel rooms across the Southeast. Soon I was living cashless. I could go for weeks with just a few dollars in my wallet, which was thick with MasterCards, Visas and three varieties of American Express. In 2001, after several swaps of credit cards to new lower-interest cards and even signature loans, it seemed I was writing 20 checks a month to creditors. The minimum payments were getting difficult to swing, so I was grateful that I could at least charge groceries. I hadn't balanced my checkbook in ten years. A friend from high school, now a bankruptcy attorney, thank God, came to town for a visit. He asked me how much I owed.
"I don't know".
"Well," he said, "some of my clients owe $20,000 or more. Do you think you owe that much?"
"Maybe... maybe even $25,000".
He was from out of state, and so recommended I see a bankruptcy attorney locally. Turns out I owed $57,000. I got that fresh start - Chapter 7 - and bought Quicken. That was in 2002. Now my credit score is 690; I owe nothing but a car payment and am about to buy a home at last. Before the bankruptcy, I couldn't move, I couldn't change jobs. Now I'm earning 40 percent more after leaving a frustrating job last year. I am so grateful.
We filed before the change in the law and were discharged from our debt in January 2006. It was one of the most humbling experiences for us. Through the whole experience I felt like I was doing something criminal. But the alternative was accepting wage garnishments which would have made our impossible situation worse. Seventy-five percent of our debt was medical bills with creditors who were no longer willing to work out payment plans. Even though we now have a "clean" slate with debts, we still struggle to make ends meet. We went into bankruptcy behind on bills and still don't make extra to catch up (basics: mortgage, utilities, etc), though I know we would not have a chance without this option. It's also made us more diligent in budgeting and controlling expenses.
I had to file bankruptcy due to the fact that my now ex-husband ran up thousands of dollars in debt behind my back on credit cards in my name. The only way I could have gotten out of it was to say he committed credit fraud and send him to prison, which at the time, I could not emotionally deal with. We are now divorced. He still bounces checks and doesn't pay his bills. I do think completely irresponsible people like him, however, are the minority of people that file bankruptcy. I think most people have to file due to huge medical bills because the United States is still the only industrialized nation on the planet that will not provide healthcare to its citizens.
I also think the credit card companies are to blame. After the bankruptcy, my ex-husband got absolutely deluged with credit card offers. Why would you loan money to a person like that? Some of these cards have 30 percent interest rates. Don't we have usury laws to prevent this sort of thing? The credit card companies actually fought a measure that would have forced them to list on their bills how long it would take you to pay off your balance if you made only minimum payments. They don't want any disclosure of their unethical business practices. I am back in school and I just got turned down for a student loan because of the bankruptcy that was not my fault. I have a great deal of anger, but I try to get through.
Personal bankruptcy has made me pay more attention to my savings. My father once said to me, "It's not how much money you make, it is how much money you save." This became clearer after filing for bankruptcy. I dropped out of college to work as a finance manager at a car dealership in Southern California. I was very young and I did not make good money choices. I was making too much money for a single person without a home. I did not know when to say no to the credit card companies. In 1997, I realized that though I was making more money than most 24-year-olds, I was very unhappy. I wanted to go back to school and pursue my original dream of being an English teacher. My employer refused to work with my college schedule (car dealerships usually give rotating days off and no guarantee of any days off) so I had to choose between the job I hated and my future. I chose my future.
So at 25 years old, I moved back in with my parents. They helped me with my bills and made my car payment while I attended school and racked up student loans. While living with my parents for the first six months, I managed to keep most of my financial problems to myself, but eventually they learned how deep I was really in. My dad sat me down and talked to me. He explained bankruptcy and how it would benefit me. He eased my guilt by explaining that my bankruptcy would be smaller than most (less than $40,000), and that in the long run, it would be more beneficial to society to have a public school teacher free of debt and starting anew, than someone who is living to make minimum payments. I filed for bankruptcy in 1999 and it was discharged in 2000.
I began my first year teaching at the age of 27 as if I were 21 - my only debt was my car payment and my student loans. I have now been teaching for six years, I am paying back my student loans, I have two credit cards with small balances, and I am saving to buy a house. I bought a new car in 2003 at a rate of 4.75 percent through my credit union. My bankruptcy has made me aware of money and what I choose to spend it on. I currently rent (I have a roommate) because I choose to live in Orange County, CA where a home is unattainable on a single teacher's salary. I know however, that purchasing a home will be a reality within the next three years. I also have enough money in savings that if an emergency arises, I won't have to live on credit. I live my life how I want, I have fun, I am fulfilled, and I still manage to put some money away as a safety net so my life does not revolve around credit.
The "community" doesn't absorb these debts. PEOPLE DO.
I'm so glad Tom got a "fresh start." My father just got a chance at a fresh start too when the man who bought his company from him walked away from his $3 million debt, leaving small subcontractors unpaid, and toddled off to Iraq to earn $20,000 per month tax-free and out of reach of his debtors. Dad, at 76 years old, gets a fresh start at a life without a retirement. Your report should have spent at least 30 seconds on the effect of bankruptcy on the individuals left holding the bag. It's OUTRAGEOUS.
I was a single mother, an RN, who grew up wanting very much to be financially smart, to own a home, to give my son a good life. After my divorce, my ex disappeared and left me with about $18,000 in debt. I was earning about $11,000. I lived on an extremely tight budget, caring for aged parents but trying to provide my son with an intellectually rich life. It took me 7-1/2 years to pay off all that debt. Many people recommended bankruptcy but that, to me, was a huge moral failing I couldn't accept. I wanted to be a person whose signature meant something trustworthy.
Once the debt was paid off, I went through a 17-week strike on $40 a week successfully. It was worth it as my income doubled in another seven years. I pretty much continued my thrifty ways, saving enough to buy a three-bedroom house, a brand-new Castro convertible couch (both things my parents had never attained), in large part to give my son a place where he could have a dog, where I could do what I wanted and where my father could live and be cared for. It wasn't fancy or in any posh neighborhood, but I felt fairly satisfied. However, several very emotionally painful things happened within one year when my son was 17. I'd had episodes of depression since childhood. One of the ways I'd coped was to throw myself into work and by helping others. In mid-1990, I went into a massive depression. I felt totally abandoned; my son had chosen a lifestyle that got him into legal trouble, the man I'd had a wonderful (I thought) relationship with suddenly abandoned me, my father had died and my best friend had moved to Florida. The fantasy that I was a strong, capable, smart woman who'd crossed mountains disintegrated. I sought primarily to work as much as possible, pay off the money I'd owed and plan for moving into a townhouse to reduce my workload. I had learned to do plumbing, rewire my house, repair the boiler, fix the walls, ceiling and roofs while owning my 80-to-90-year-old house. I began to feel like all the work I'd done to raise my son, to be a good, useful, productive and successful person had been a total waste of energy. Depression led me to feeling constantly tired, sad, useless, a failure. I got to a point where all I wanted to do was work and sleep. I was having trouble sleeping so I began to drink a couple of glasses of wine after work to get me to sleep.
It took only about 3-1/2 years to be drinking half a quart of vodka a day, having blackouts in which I did things I never thought myself capable of doing. I got treatment for my depression, but the medications didn't work with my drinking, which was mostly my secret for a long time. I finally was fired from the hospital I'd worked in for 27 years after coming in to work one morning drunk. I was not aware of being drunk. To the best of my memory, I'd passed out about 9 pm the night before, but the blood test didn't lie. The loss of that position I'd worked so hard for, sacrificed much of my personal life for, and the loss of a pension at the age of 48 was the last straw.
I don't recall a great deal of the next couple of years but I had to file for bankruptcy. I lost my house, almost everything in it, my car. At that point, I'd decided that all the things I'd believed about myself and about life were all lies. I felt I'd lived a whole life making the wrong choices so I didn't care about doing the right thing anymore. I was in and out of rehab, inpatient and out-patient. I was spending my time with people who had no moral compunctions about anything, was robbed of my private disability money more than once and finally a man whom I'd been "playing nurse" to tried to murder me because I only had 76 cents left and he needed his drugs. I was in an ICU for three days before the police were able to know what to charge him with: murder or attempted murder.
I had been sober five months at that point, but now the addition of symptoms of Post Traumatic Stress Disorder added to my fragile mental state. It took another 17 months of struggle for me to finally stop drinking for good.
I've been through a long road since then. When my house was padlocked, I went to a halfway house. I was terrified I'd destroyed my brain altogether. I'd already had a BS in Nursing and a BA in English, but I was terrified I couldn't learn any more. I did not want to be a nurse any more as I felt, knew and was told repeatedly that I needed to learn how to take care of myself and stop taking care of everyone else. I didn't think I could do that working as a nurse, so I went first to a community college to study Paralegal Studies. Ten years before, I'd done some medical-legal consulting as a second job and enjoyed the work and I needed to know if I could still learn and think.
I completed the work in two years very successfully and went on to complete a BA in Legal Studies. However, at my age, no one would hire me as a paralegal. I spent many months trying to get work in that field but finally realized that the best job prospects in this financially ruined part of the country was as a nurse. I've had my struggles since I went to a nursing home to work in 2003. I went without a car for four years (first time since 18) and that was frustrating and kind of humiliating. It took me a while to get over the shame of allowing this to happen to myself, of being poor, of being "on welfare" after my private disability ran out, of subsequently being fired from my first job after all this. I've had my share of hard times, lost many friends, and made some new ones.
The money part had been hard and continues to be, though not as bad. I know how to live on little. But just knowing that in 1994, I could walk into a store and get instant credit and now I get humiliating rejections still bites a bit. I got a credit card through a store because someone read my last name incorrectly as "Stove". I handled that very well until they gave me an actual Visa card. I'm still handling it well and have corrected the spelling of my last name. I did make one payment late and now my interest rate has shot up. I had to max it out repairing the first old car I bought, but I will pay it off.
I had to declare bankruptcy in January 1995. I get loads of offers in the mail for credit cards and loans at outrageous interest rates or that require I put money into them before using them. I shred them. I've begun to put a little bit away for retirement but I'm facing having to work till I drop dead.
But I've come to a wonderful rapprochement with my son and his family. I am living well enough with a small apartment, a 1990 car and I have hope, which I did not have for many years. I am working and independent. The man who stabbed me will be getting out of prison in mid-October and I am trying as well as possible to be prepared for that. I have learned much. I am probably happier than I've ever been, though life is no bed of roses. I'd like to buy a small townhouse at some time, but at my age, now 58, who knows. I'm trying to stay healthy because right now I know that my health will be my greatest ally or my worst enemy. I'm hoping I have more genes from my father's side, where they all lived to late 80s to 100 years. My father worked until he was 84. I'm sure I'll need to.
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