050: Bankruptcy: Panacea or Placebo? & Inspirational Reading September 24th “Time”

Episode Summary

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Bankruptcy: Panacea or Placebo?

Recently, someone mentioned that they are considering bankruptcy, and described their dire situation. The person is on disability and her monthly debt repayment is not too far from half her income. It reminded me of my own experience declaring bankruptcy. Sort of.

Yes, my situation was dire, but it was also of my own making. My memories are hazy around it. It happened in 1989 and I have no computer paper trail of my life before 1994. So I can’t go back to refresh my memory.

A Dark Chapter in My Life

Here’s what I do remember – the profound relief when I was freed from the debt. But there’s more to even that part of the story. Because how that debt was incurred was a sad testament to the insidious nature of my multiple addictions. It’s really a story for another day when I have the guts to reveal it to you. But I will tell you that a good part of that $75,000 debt was incurred by my ex-boyfriend to support not only him, but at least one other woman he was involved with. Getting the call from Macy’s or Bloomingdales, or whatever store it was, that a young woman was there using my credit card, buying lingerie, but somehow they weren’t sure it was me, was a kick in the gut.

And later, getting a call from that same young girl, not really a woman because she sounded about 20 years old (though I was only 29), telling me she was pregnant by my boyfriend and then giggling with someone in the back ground, was no fun either.

But the point is, I had actually gotten credit cards put in my boyfriend’s name despite my trepidation because of my desperate desire to be loved and his guilt-laden demands that I do so if I loved him. But that isn’t even the tip of the iceberg in how deep into the darkness I dove.

But, back to bankruptcy. This was not my first, nor my last, foray into out of control spending and debt. Just that this one was the deepest, and the one where I was least responsible for incurring the damage … directly anyway. I could have put a stop to the cards the first month he didn’t pay off the American Express bill. But I didn’t.

So, in the end, it was really my fault.

But that one year freefall into hell I spent with that man left me with, not only the debt, but nearly landed me in jail for five years. And that’s the part of the story I’m not ready to tell you.

So, four years after that debacle, I went bankrupt.

Whoopee! Let the Party Begin (Again)

The thing about bankruptcy, at least in 1989 when I did it, was that it was a great way to ensure you’d get lots of credit in the future because you can’t go bankrupt again for years.

I had never been able to live within my means. My means were meager, but someone not addicted to more, more, more and the bright and shiny object syndrome (you know, the one where you feel like you’ll die if you don’t buy that next thing) could have managed without debting.

Being the money addict that I was, when, if I remember correctly, about a year after the bankruptcy was discharged, I started getting credit card offers again, I was elated (though I told myself to be cautious). And this is the problem with bankruptcy for people like me. It’s so easy for me to lie to myself that I will be able to use credit cards responsibly if I just have another chance to do so.

Sure, I was willing to stop spending when there was no more credit to be had and the specter of living with debt that exceeded multiple years of annual income lay before me, not to mention living like I’m in the witness protection program to dodge mail and phone calls from creditors demanding their money back.

Who wouldn’t jump at the chance for a clean slate? OMG talk about the idea of Santa God or a magic genie! Isn’t it every compulsive spender’s dream to buy everything her heart desires and then, poof, discover that it was all a gift? It’s like being a compulsive eater and binging my brains out in the candy store and waking up the next day five pounds thinner feeling happy and peaceful. Yeah, that never happens. I can tell you from hard experience that there’s no do-overs like a bankruptcy for compulsive eaters.

Thinking Like an Addict

But I did feel shame and guilt on many levels, yet I also kind of felt like it wasn’t my fault that I had incurred so much debt because, after all, I was a victim of a con artist and had suffered so much at his hands. But, look at that – really it’s that overall sense of entitlement and delusional thinking that is indicative of addicts (well this addict anyway) that brought me to this moment. And it was easy to shove all those feelings down once I didn’t have to pay the debt. And there was so much relief in no longer having to deal with those demand letters and obnoxious creditor phone calls.

Reasons for Choosing Bankruptcy

But I have to pause here and say that my situation was vastly different from someone who has incurred medical debt due to a health crisis or a person who just can’t make ends meet and turns to debt to survive. Here’s an article from the National Bankruptcy Forum with shocking statistics about how much debt American’s incur due to medical expenses. A study showed that 7% of respondents had filed bankruptcy due to medical debt.

So, again, I’m not talking about people who must make a choice to debt for medical treatment or lose their life, or a parent who debts to feed her children, or even someone who spiraled down into debt because he lacked awareness around his spending and just needs to be educated to gain a better perspective. Nope, I’m talking about people like me who make a choice to live above their means.

Still, I’m not saying that declaring bankruptcy is a bad idea even in that case. But what I know today is that if I’m not willing to use this opportunity to face the truth about my spending and get help, then bankruptcy is just a band-aid … or, even worse, just another way to get high from spending. Because the relief I felt when the judge banged that gavel and released me from being responsible for my actions is no different than the momentary high I feel when I buy that next desperately desired item.

Back in the Saddle Again … But I Still Can’t Tame that Wild Horse

A year or two after my bankruptcy, I was back at it again. Ten years later, I was about $22,000 in debt. Luckily, at that point, I found a 12-step support group and, instead of declaring bankruptcy, paid that debt off over the course of years. I do remember how hard it was to face the creditors on the phone and to have the humility to offer them $5/month because that’s all I could afford. Most refused, but when I went ahead and sent the $5 anyway and they accepted the payment, I discovered they couldn’t get a judgement against me as long as I paid steadily (but I don’t know if that is still the case today). I continued paying down that debt and eventually, with some windfalls and diligence, finished paying it all off.

And then, I thought I had it all under control and left the support group. Notice that you haven’t heard me mention hitting bottom once.

That time, Capital One was the first of those devious snakes offering me that forbidden apple in the guise of a shiny new credit card. I remember being lured in by the idea that I had to pre-fund the card and so couldn’t spend above my means. What could possibly go wrong? Well, once I had re-established my “good name,” they relaxed their rules, luring me into spending more and more over time with an expanding credit limit and no more pre-funded buffer.

American Express was smart enough to ban me from ever getting one of their cards again. There were times I resented that. Now, I’m grateful.

Hitting Bottom

So when I ended up $34,000 in debt in 2009, I had enough recovery still left in me to know that bankruptcy wasn’t the answer. I finally hit my bottom that time. I knew I needed to feel the pain of my actions because everything I justified debting over was not justifiable. I had nothing to show for all that spending by the way.

I needed to experience the delayed gratification of paying that debt off, no matter how long it took. And I knew I couldn’t do it alone, so I went crawling back to my support group. Just so you know, I paid off that debt. It took seven years and I did so despite becoming disabled. And I haven’t incurred any new debt since April 25th, 2009.

So, for some people, bankruptcy is a necessary and appropriate way to heal from a devastating episode in life. For others, it’s how they finally hit bottom with their spending, and they take this way out as the grace of a Higher Power to carry them to an awakening around responsible spending and living within their means.

Going bankrupt is a “get out of jail free” card, but it’s not a codependent parent you can hit up every time you get in trouble. And for me, it was just a way to continue living in denial, delaying my own recovery from compulsive spending.

I’d love your comments, questions, and feedback. Just leave me your thoughts below.


Update on video training

Well, I finished a video last week on how to track cash in YNAB. But I have to say that, to do a video training class on spending plans right is an enormous endeavor that will take me years to do, based on how long it took to do this video. So I’m not sure when, or if, that’s coming. It’s disappointing because I really do want to find a way to help more people.

I now have a YouTube channel!

Weekly Phone Conference Round-Table

In the meantime, I’m thinking about doing a weekly phone conference round-table where we’ll focus on a specific topic around compulsive spending and spending plans, and I can answer questions.

If you’d be interested, please email me.


Spending Plan Training

If you’re fearful about incorporating a spending plan into your life, remember that it’s a tool to help you make sane choices around money, not a torture device designed to deprive you.

Though a spending plan will not cure compulsive spending, there’s no question that it’s an essential tool for compulsive spenders trying to recover from the addiction.

But if you’re stalled or paralyzed in your attempts to create a spending plan or feel lost and overwhelmed about the process, I can assist you. I’m an expert in helping compulsive spenders overcome the emotional obstacles they face around creating and living with a spending plan, and I work with you to develop your spending plan foundation and teach you how to track your spending ongoing. Most people complete the process within three weeks.

Plus, for those who already use YNAB to track their spending, I can troubleshoot and fix problems you’re experiencing with your spending plan and provide one-on-one training around any issues you may have.

To set up a free 20-minute call to see if I can help you or to learn more about my training program, go to ICantStopSpending.com/training, and sign up for my (very occasional) newsletter and receive a free PDF version of the Five Year Recovery Journal (a $9.99 value).


Inspiration from the Daily Reader for
Compulsive Debtors and Spenders

I’m so happy to be walking this path with you.

Resources Mentioned in this Post

Our new YouTube channel

Here’s an article from the National Bankruptcy Forum with shocking statistics about how much debt American’s incur due to medical expenses.

Music Attribution

“Life of Riley” (Intro and Outro), “Slow Jam,” “Carpe Diem,” “Cold Sober,” “Comfortable Mystery,” and “Cuban Sandwich” by Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 3.0 License
http://creativecommons.org/licenses/by/3.0/


Help with Your Spending Plan

I can help you overcome the fear of looking at your numbers, create the foundation for your spending plan, and provide one-on-one technical help to teach you how to use your spending plan software. Click here to read how I can help you with your spending plan

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