As I surveyed the financial wreckage of my life in the aftermath of the collapse of my veterinary practice, the hardest pill to swallow was the liquidation of my personal retirement savings. I had been forced to withdraw the funds to pay off business debts and conceding that money to my failure left a gaping hole inside of me. That was 10 years of carefully setting aside money toward my future. Even at my lowest points, I had continued to contribute to that fund, and the loss of time and compound interest it represented left me raw. Would I ever see a day where I could afford to not work? Was I destined to be a senior citizen living off welfare or relying on my children for food and shelter? I found work as an associate veterinarian in a neighboring practice and slowly pulled my life back together. It was a long process and the hits kept coming. We all hear about businesses going under but few people ever talk about the details. I found myself in a very lonely place with no one to turn to for concrete advice on how to go forward. The unpaid property loans kept chasing me as I had guarantees with the bank in question. When the bank took action to try and garnish my wages, it was a terrifying new low. Left with little choice, I arrived at the doorstep of personal bankruptcy to extricate myself from the crushing volume of the debt I owed.
I never understood what bankruptcy was before meeting with a trustee to determine what my options were. Our society treats bankruptcy as a taboo more shameful than divorce or suicide. The impression I always got from the adults I knew was that bankrupts are horrible failures who have ended up in disgrace because they are bad at not just money but life. My first meeting with my bankruptcy trustee was both terrifying and an immense relief. Here was a professional who could assess my situation and give me options. He explained the difference between a consumer proposal and a bankruptcy and what decisions I would have to make. That was the most empowering aspect. Realizing that choice still existed and that I was not running away from my problems but achieving a state where my creditors would receive equitable treatment, and I would not be permanently financially crippled.
At its simplest, bankruptcy is a legal action which allows a debtor to get relief from overwhelming financial obligations so that they can continue to be a contributing member of society. The debtor must make payments to a trust over a prescribed period of time and may have to relinquish assets to the bankruptcy as well. At the termination of the bankruptcy, the trustee will disperse the funds collected to the creditors and receive their fee. A debtor is required to attend mandatory counseling sessions and to report their income and spending each month in detail. The bankruptcy payments are based on income so the amount that is contributed may vary from month to month based on your personal or family earnings. When the bankruptcy is finalized, and if the debtor has met all their obligations, they are discharged. They can no longer be made to pay against the debts from the bankruptcy and must work to rebuild their credit.
What bankruptcy is not, is a signal to society that you are a failure and unworthy of help or support. Sometimes you do everything right like get a good education and buy a business in an industry you are qualified for. But checking all the boxes and achieving each goal doesn’t always lead to a happy ending. I have learned a lot on my journey through bankruptcy and one thing that I am more passionate about now is to talk to others about money. No matter how uncomfortable the subject may be, we are hindering ourselves by living in ignorance and refusing to share our experiences good and bad. I still feel a twinge of fear to tell people that I have been bankrupt, but I have to remind myself of how terrified I felt when I had no one to talk to when I really needed it.
The first thing I did after liquidating my retirement savings and paying off business debt was to set up a new plan with automated withdrawals from my chequing account. This was before I declared bankruptcy and I managed to budget for my mortgage, household bills, and debt payments while still socking away money in my RRSP. My new strategy was to have weekly payments instead of monthly because it added up to a couple of more payments in the year increasing my total contributions. I maintained this schedule through the end of my bankruptcy. As part of my bankruptcy counseling, I was tasked with writing down my financial goals for the next year and the next 5 years. I outlined in detail my cost-cutting and savings targets for the future including my plan to increase my contributions to my retirement savings plan. I am on course to achieve this goal before the end of this year. I calculate that I have to increase my weekly contributions from $50 a week to $150 a week. This is a dramatic increase but I have fewer years to reach my goal now, and I have to adopt a more aggressive strategy. During my bankruptcy, I lived paycheck to paycheck which was an awful feeling. Having $50 left in the bank and ten days before the next payday created a morass of anxiety. I became extremely streamlined in my budget and cut out all non-essential spending. Now that I have finished my payments, it is so tempting to relax my death grip on the funds.
It is a terrifying feeling though, to go from such a restricted state. The fear remains that I will somehow miscalculate and run out of money before the end of the month. I have to force myself to live a little and dream a little. I treat myself to the occasional restaurant meal and I peruse clothes online. I started a travel fund which only contains fifty dollars at the moment, but it has time to grow. Going through bankruptcy has instilled a deep-seated fear of money in me that I must battle against every day. I have skills and I know how to budget, but I also know what it is like to try to do everything right and have it all come crashing down. So I spend extra time reassuring myself by checking my bank balance and questioning every purchase. I practice breathing and staying calm when unexpected expenses arise. Most of all I try to forgive myself over and over again for the mistakes I have made in the past and be kind to myself for what is to come, because I know I will have a solid financial future. Bankruptcy did me a favor in a way since because took away any sense of entitlement I had possessed. What I have left is the power to endure and also to thrive.
Debra is a Career Gal and blogger who loves to talk about all the things that worry us about work. From money to motivation, you can find her writing about it over at debrahaydock.com.
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