Years ago I owned a group of retail businesses, and I enjoyed some measure of financial success for part of the 1990s. Business conditions rapidly deteriorated, however, and I found myself in a swirling vortex of multi-million dollar debt.
To free myself and my family from the encumbrances of numerous personal guarantees and obligations to the corporation I founded, I had to file for personal bankruptcy. Prior to my own deteriorating business situation, I always considered those who filed bankruptcy to be persons of poor character. It took some hard lessons for me to realize that some people wind up in bankruptcy court for reasons other than trying to fleece their creditors.
In my complicated case, it would have taken me the income of twenty to thirty years to pay off the potential indebtedness I faced, especially on such items as real estate leases, equipment leases, and accounts payable that were assumed by the new owners of the business. There was no conceivable way that debt consolidation or debt management were an option, given $1 to $2 million in liabilities. While bankruptcy brought a considerable sense of relief, this also meant that I was now considered a bad credit risk for the first time in my life.
My wife and I avoided the temptation to open new credit card accounts, which is a tactic that some post-bankruptcy specialists recommend. Instead, we focused on saving as much money as possible to pay cash for items such as appliances, cars, and unexpected emergencies. Part of this was out of necessity, as creditors are a bit reluctant to extend credit to consumers with a bankruptcy on their records, but part of this was a desire to never find ourselves in the position where we were beholden to the whims of lenders.
The better part of a decade has since elapsed, and even though we have significantly less income than in some previous years, we have managed to increase our net worth to its highest level. We still shred those credit card offers that show up in the mail, recognizing them as little more than pathways to poverty. We buy used cars, shop at second-hand stores, clip coupons, and evaluate every purchase to determine if it would be a "need" or a "want."
I have found that the act of declaring bankruptcy offers much more than relief from creditors. If a person so chooses, bankruptcy can offer an opportunity to rethink one's true priorities. Many fools jump right back into the expensive game of credit slavery, but for other people the fresh start offered through Chapter 7 liquidation can open up possible ways of living simply that they previously could only imagine.