Written by attorney Marshall D. Schultz

Overcoming the Emotional Toll of Bankruptcy

Succumbing to the detrimental effects of financial instability can be emotionally devastating. But, by accepting one’s situation and viewing bankruptcy as a second chance, debtors can regain emotional, physical and financial security once more.

The American people cannot deny the link between financial trouble and negative emotions such as depression. Going through what has been coined “The Great Depression" has thrown the country into a financially and psychologically depressed state. While our nation’s current economic climate is one of national concern and public outcry, the more silent epidemic occurs at home and behind closed doors. When people are used to making good money and being employed and making good use of their expensive college degrees, when they are laid off or when recent college graduates can’t get a job, they can easily become discouraged and even depressed about their situation, and this is natural.

There are major depression triggers, and one of the greatest triggers is losing a job and sometimes the inability to get a new job, especially in this current economy. In addition to the financial stresses attached, when people lose their job, it’s essentially the same as losing their sense of identity and it can jeopardize their feelings of self worth. Statistics have shown that the older you are and the more you were paid, the longer it is likely to take for you to find work in the near future. Also, those who have been downsized in certain industries such as auto manufacturing may have to become trained in a new profession or a new skill, and this can be discouraging or undermine one’s self confidence.

Another major cause of stress and anxiety is overwhelming debt and financial issues. In today’s economic climate, a number of American households have had to deal with unemployment, underemployment, work-related injuries, and injuries from accidents, as well as divorce, all of which may be inter-connected. Debt can cause too many sleepless nights, exhaustion can cause irritability and strained relationships and arguments can lead to the dissolution of marriage, it can be a vicious cycle. Worrying about paying the bills can be an ongoing mood-killer and no one wants to live like this. Sometimes couples have difficulty talking openly about money problems and those who internalize their struggles are more at risk. Not knowing what to do or where to turn can be overwhelming and frightening, and feelings of shame only compounds the fear.

Whoever said money can’t buy happiness probably never had to worry about getting their lights shut off or their car repossessed. While money itself may not provide happiness, it can certainly be responsible for inciting negative emotions such as fear, anxiety, worry, grief and shame. These are just a few emotions that people may experience when they are struggling financially, and they are some telling signs that it may be high time to consider their bankruptcy options.

The most common form of consumer bankruptcy in the United States is Chapter 7, which is otherwise known as the debt liquidation bankruptcy. With a Chapter 7, the majority of the debtor’s unsecured debts are literally wiped out or discharged through the bankruptcy process. Some of the types of debts that can be included in a Chapter 7 include: credit cards, medical bills, past-due utilities, certain taxes (more than 3 years of age), and personal loans. What cannot be included in a Chapter 7 are: child support, spousal support, criminal restitution, most student loans, court-ordered fines and recent taxes. With a Chapter 13 bankruptcy, debtors reorganize their debts and pay them over a period of 3 to 5 years, in the end they may pay off all or merely a portion of their debts. Those who file a Chapter 7 normally don’t have the means to file a Chapter 13 and are in such financial ruin there is no benefit to filing a Chapter 13. However, in order to file a Chapter 7, the debtor must first pass the bankruptcy means test. This test compares the debtor’s income and their household size to the median income of their state. If their income falls below their state’s median income for their household size, then they automatically qualify.

While filing for bankruptcy may be a mental burden, it’s important for the debtor to realize that while the act of filing for bankruptcy may be psychologically difficult, the benefits can outweigh any negative emotions attached to filing. Most people who finally file bankruptcy have already juggled their debt for so long that by the time they file they’re already mentally exhausted. The idea of filing for bankruptcy is often more internal than external and it’s usually the person’s self-esteem that takes a bigger hit than their finances. That said many of the perceptions people have about bankruptcy are actually false. Debtors may worry about what their friends and family will think and they may worry about bankruptcy being a black mark on their credit. The truth is, all of these misguided fears only add to the fear and anxiety and what other people think is entirely irrelevant, especially when filing for bankruptcy is the most optimal solution for the debtor and their family. While bankruptcy does remain on your credit, it’s erased after ten years.

Sure, no one every plans to file bankruptcy, but it can offer debtors a much needed financial fresh start, it can dramatically reduce if not eliminate stress and it can put the debtor back in the driver’s seat. It’s important for debtors to reverse their view on bankruptcy, and instead of looking at it as failure; they need to look at it as a learning tool and a path to a new beginning. Part of every debtor’s goal of filing bankruptcy should be to create a long-term plan to restore their financial health and stability. If people can’t trust themselves with money after bankruptcy, then it’s a wise idea to educate themselves and implement financial strategies they weren’t using before, such as paying off their credit cards in full each month and automatically depositing some money into their savings with each paycheck.

When debtors decide to file bankruptcy, they need to come to terms and realize that it’s okay to have this moment of honesty with themselves, and they need to seek help from a bankruptcy attorney.

Additional resources provided by the author

The Law Offices of Marshall D. Schultz is a bankruptcy law firm located in Detroit, Michigan. The attorneys at the firm are members of the State Bar of Michigan and the U.S. District Court. They have more than 33 years of combined experience and have handled more than 10,000 consumer bankruptcy filings. The attorneys at the firm are prepared to assist you in any debt situation; in the past they have represented Chapter 7 trustees, consumer and business debtors, as well as corporate creditors. To learn more about the firm’s services and to schedule a free consultation, please call (888) 822-6730 or visit the firm’s website online at

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