Why personal bankruptcy wasn’t an option for me

by Kristina on January 3, 2013 · 2 comments

Good Morning Dinks. I have definitely had my share of financial problems in the past, from over spending and living on debt to spending carelessly and living paycheck to paycheck.  I don’t want to forget about my past financial life because I have definitely learned from my mistakes and I am a better person for it.  However at the same time I don’t want to make the same mistakes again because I don’t ever want to be broke and live with the financial burden of being overwhelmed by debt.

How I got into debt

I was in my late twenties, earning a six figure salary and I thought that I had it all.  As a young professional I had an expensive downtown apartment a brand new car and I was travelling several times throughout the year.

I was spending money carelessly because I knew that every two weeks I had a pay check coming in.  But this was not a smart strategy and it ended up being a vicious cycle of debt.

Hitting Rock Bottom

I woke up one morning, checked my account balances and decided that I couldn’t live like this anymore. I was only working to pay off my debt and I was accumulating more debt in between paychecks. The evil cycle had to stop and only I had the power to stop it. I knew that I couldn’t afford to be in debt anymore and I had to start making changes. I didn’t think that I could afford to pay off my tens of thousands of dollars in debt so I started researching the process and implications of bankruptcy.

As a financial professional I knew a little bit about bankruptcy but I always thought that it was the lazy mans way out. I never thought that I would see the day where I was getting bankruptcy advice, yet there I was sitting in an office waiting for a bankruptcy counsellor to asses my current financial situation. I wanted to learn about the bankruptcy process from start to finish, I wanted to know which assets I could keep and how a bankruptcy will affect my financial life in the future.

The bankruptcy counsellor told me that given my current financial situation I did qualify for bankruptcy. “Qualify for bankruptcy” I never thought that I would ever hear those words. I mean honestly in what world does a financial professional let themselves become a candidate for a personal bankruptcy? The counsellor informed me that my retirement savings were safe and that I would still be responsible for repaying my student loans but other than that I would have to give up everything else, including my brand new car.

Why I wanted to do it on my own

The meeting with the bankruptcy counsellor was definitely overwhelming and before I signed any papers I wanted to think about the implications for a few days.  Needless to say, I was in tears while I drove him in my favourite new car that I would soon have to give up if I filed for bankruptcy.

After speaking with the bankruptcy counsellor one more time I decided that it was not the solution. I would have a 7 year mark on my personal credit file and I would have to declare my personal bankruptcy to my employer.  Apparently when you are licensed to sell mutual funds and give financial advice to other people you are considered to be an undesirable employee when you file for bankruptcy. If I decided to file for bankruptcy I would only would I lose most of my personal assets, I would also lose my job.  Therefore I decided that bankruptcy was just not an option for me.

Stay tuned for part 2 of this post as I discuss how I started paying off my personal debts and how I got my life back on track in only 3 years.

Photo by RevStan

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{ 1 comment… read it below or add one }

1 DC @ Young Adult Money January 3, 2013 at 3:13 pm

Kudos to you for being so open about your past finances. I think most people have personal finance issues, but only some are willing to share those and/or make them public. I have a huge amount of student loan debt so I literally would gain nothing if I ever declared bankruptcy…and I would lose a whole lot as far as credit rating, whatever possessions I have, my house, etc. I definitely respect people who are willing to stick it out and make a plan to pay down their debt.

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