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Life in Bankruptcy: interview with a bankrupt.
The trouble with bankruptcy
You read a lot of stuff about the technicalities of bankruptcy but not so much about how being in bankruptcy actually affects your life. If you are teetering on the edge of the bankruptcy abyss it's often too deep to see where the fall will take you. This is an interview with a bankrupt which might help you decide if the dark side is really your destiny.
I quickly realised that trying to write the definitive everyman's guide to living with bankruptcy would be like nailing blancmange to a tree. There are simply too many variations in people's personal circumstances. It's like a cinema exit poll. Everyone has seen the same film, for some it was the best thing since the Sound of Music and for others it was the worst since the Sound of Music. All I can do is write about one person's experience and if the cap fit's fine, if not you'll have walked a mile in a bankrupt's shoes.
How did you end up bankrupt?
Bad management, divorce, sticking my head in the sand, throwing good money after bad, being sucked in by credit card company enticements, irregular income, unrealistic expectations. In the nineties and early noughties it was too easy to get credit. Why wait for tomorrow when you can have it bigger and better today. A cocktail of ignorance shaken but not stirred for ten years or more. It's something that creeps up on you like middle age spread. You wake up one morning and realise you've accumulated a sizeable spare tyre and that it's getting bigger by the day. No amount of crash dieting makes it go away.
So is bankruptcy the financial equivalent of a gastric band?
More like someone takes away your cakes and sweets. You want a burger but can only buy celery.
Was bankruptcy a spur of the moment decision?
No, it took me three years to finally figure out that I had no other choice.
Did you explore other ways out of debt?
Yes, I did. In the UK the Consumer Credit Counseling Service were very good. They gave me the courage to tackle my creditors and guidance in preparing financial statements and to make offers of repayments in line with my income. In the USA the equivalent organisation would be http://www.consumercredit.com/
What was it that made you decide that bankruptcy was the only solution?
I asked my big brother for a loan to pay my mortgage and he turned me down. I didn't mind. It was the best thing he could have done. A big reality check that this was the end of the line, no one would lend me any money. The gravy train was finally derailed.
Did you understand what bankruptcy would mean to your life?
Financially yes. The British Insolvency Service provide very clear guidlines about the law, what you can do and what you can't do, what will happen to your assets.
I didn't have a clue about how the financial institutions treated bankrupts. There are only a small number of banks that will give you even the most basic account. Anything that involves a credit check will rule you out. You have to be prepared to operate on a cash or pay as you go basis.
Did you have a mortgage at the time?
No, I had sold up six months previously and used the small amount of equity to pay off mortgage arrears and go on a trip to Australia and New Zealand to visit family and have some time to figure out what to do with my life. My girlfriend gave me a roof when I got back.
How long will you be bankrupt for?
Normally for a straightforward case you can be discharged in twelve months in the UK. But I am in the fourth year of a five year penalty.
Why did you get a longer period?
The Official Receiver took a dim view of my trip down under. Even though the cost was less than a tenth of my total indebtedness their opinion was that I should have given that money to creditors. I suppose I should count myself lucky they might have deported me to Australia not so long ago.
The silver lining was that while I was traveling I discovered writing and since then have had several things published and written an award winning short film. I needed that time out to begin the transition from a life out of control to a life where I have a new direction.
What has been the most difficult part of being in bankruptcy?
Publicly admitting that you messed up was a tough one. There is also a certain amount of honour involved in responsibly paying your debts and when you can no longer do it you feel as though a trust has been broken and you are now the bad guy.
There is also the removal of your freedom to make decisions regarding your finances. Choices of action have been taken away from you and you have to manage with a very limited set of options.
Is there anything good about bankruptcy?
When approached by credit card sales people you can ask them if they cater for bankrupts. They then swiftly apologise for having taken up your time and beat a hasty retreat.
But the biggest thing was the removal of the burden of debt. I would say this was the one thing that made all the negative aspects of bankruptcy worthwhile. Trying to manage debt can take a toll on your health and wellbeing. One of the biggest problems I encountered in this respect was the selling on of your debt from one credit agency to another. You would go to the trouble of preparing a financial statement for each agency and trying to negotiate a repayment schedule. Then they would sell on your account to someone else and the whole process would begin again. I worked as a contractor and there would be times when I couldn't get work and would miss a payment and the whole process of negotiating, re-negotiating and being sold on would start over. Bankruptcy put a stop to that vicious circle and gave me the opportunity to start over with a clean slate.
What has bankruptcy taught you?
It might be a cliche but make it a rule to live within your means, if you haven't got it you can't spend it. This one rule will keep me out of trouble.
What advice might you offer anyone contemplating bankruptcy?
If you have a choice in the matter try and explore every other way of finding a way to repay. There is a lot of good advice out there, especially on the internet.
Don't be afraid to tell someone and get help. There are debt advice agencies who will help. It's also vital to have a partner who can give you support, not necessarily financial, but certainly moral. My partner has been a rock and being able to confide and discuss your troubles is worth it's weight in gold.
I would also do as much as possible to buy time. Time to reflect on what you are doing wrong, time to work out a plan to get yourself out of the hole and time to get your life back on track.