Bankruptcy - Lessons Learned That Can Benefit You
Have you ever declared bankruptcy? Who helped you get the discharge? What caused it? Where are you now as a result? When did it happen? How did you deal with it? Why did it happen?
Don’t panic! I’m not asking you dear reader to answer these questions. I am! For good reasons.
My wife and I had to go through bankruptcy. By answering these questions my goal is threefold:
- To suggest actions you can take to prevent it.
- If you have to go this route, things you should and should not do for the best outcome.
- To share with you how life after bankruptcy can be managed with minimum impact.
Why Did It Happen?
There are many reasons. But the biggest one is extremely poor money management. I had a very good job designing cockpit displays for military pilots. It was fun meeting customers and suppliers, traveling the world and managing projects. Would you say that this smacked of a high paying job? You bet! I was an engineer who for the last 10 years of employment earned an average of $100k annually.
One of the best decisions I made was to contribute to the companies 401k plan as well as their stock purchasing plan that had matching company contributions. At the end of my career I had accumulated almost $500k in retirement savings.
Then I got laid off. The company decided to off load the job I was doing to subcontractors. I was at an age that I didn't want to learn new tricks. Hence, it was goodbye. I failed to get another high paying job that I desperately needed in order to pay the bills.
When Did It Happen?
My lay-off occurred several years before my retirement pensions and Social Security would kick in. I started making withdrawals from my retirement savings. I panicked and started investing in risky strategies such as Options.
A late night promotion TV program that extolled the virtues of trading Stock Options got my attention. Since I had rolled over my 401k savings into a traditional IRA, I could grow my account and defer taxes until I made withdrawals. Before long, I was enrolling in various training programs with this company at a cost of several thousand dollars.
At first things went well. My IRA increased in value often gaining up to $4000 in one day. Being the optimist I am it didn’t cross my mind to take profits and park that in cash.
What Caused It?
Then The Great Recession of 2008-2009 occurred. I watched as my savings dwindled drastically. Options work using leverage. When stock price rises, the associated Options jump in value at a higher percentage than the stock. The opposite is also true. When stocks fall, Options also fall by a larger percentage. I was sure everything would turn around bu5 it didn’t. I lost virtually all my savings. That’s what caused us to apply for bankruptcy.
Who Helped Us?
Fortunately I was a member of LegalShield. They provide affordable legal help and their lawyers helped us draw up the papers and file in Bankruptcy Court. It went smoothly and all our debts were discharged. We were able to keep the house. By now our pensions had kicked in.
The bank restructured our mortgage per the Obama plan and reduced our outstanding loan by 30% and put us on a reduced interest rate. The net result, lower mortgage payments we could afford.
How Did We Deal With It?
We felt as if a huge millstone was removed from around our necks. It was like a fresh start. That was a time when a significant percentage of the population declared bankruptcy. And it all started with Lehman Bros! Hence, the stigma of bankruptcy was greatly reduced.
If our financial situation had not deteriorated we would never have qualified for a major mortgage restructuring. This was not a refinance and only available as a result of the financial catastrophe the whole country was thrown into. Several of our friends were in the same boat and were going through similar procedures.
This was a time when we got into the habit of paying cash for all our purchases. We had no credit cards to use. Also, our credit rating had taken a hit. This didn't affect us much as we didn't need credit.
Our cars, although aging, were paid up for. The issue we had to deal with was increased repair costs.
Where Are We Now?
Our situation is actually looking up! Just a few years later we started getting offers for credit cards and car loans. We found that astounding! We had heard stories that it would take 7 - 10 years after bankruptcy to qualify for any loans.
We desperately needed cars in better shape and took advantage of these offers. My wife and I both qualified for one year old cars that we purchased two years apart. Our interest rate at around 8.5% were high by the standards of the day at 2% to 3%, As the saying goes, beggars can'e be choosers. As long as we could afford the monthly payment we got the cars.
My wife still had her day job. And I looked for work too. I got a position as an independent solar electric systems sales rep and even qualified for our own hoe system. I was paid my own commission! We truly did need two cars.
Several years later we both fully retired. I sold my car that had a higher monthly payment and lower gas mileage. We have solar panels on our roof and a drought resistant landscape that keeps our bills low for the Los Angeles Department of Water and Power.
No matter what we do, our retirement income is fixed. The only way to increase it is to create it. Hence, Wealthy Affiliate. I know Affiliate Marketing will help me replace the money that I lost and then some.
Lessons Learned
When I got laid off we should have declared bankruptcy right away rather than waiting till we exhausted our savings. Little did I know that retirement savings as well as one home are protected by law.
If you find yourself needing to declare bankruptcy, do not wait. Get yourself a good lawyer to do it efficiently like we did. Having had this amazing legal assistance from LegalShield is one of the reasons why joined Wealthy Affiliate. My initial affiliate website is to help others see the value of having access to affordable legal help.
We discovered that life after bankruptcy is not as onerous as we were led to believe, The critical outcome is to not make the same mistakes again. Especially as creditors are willing to lend us money again and shower us with credit cards.
Credit cards are a useful tool. In today's society, cash is used less and less. I suggest acquiring a prepaid credit card and top it up from your bank account as and when you need to use a card for payment. We use our debit card now, that is treated just like a credit card at payment terminals.
In this way you will avoid accumulating large debt and not be burdened with high monthly revolving debt payments. The fact that you are building an affiliate marketing business says a lot about you. The income you create will given you a safety net.
Recent Comments
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I lived in both in Africa aka emerging market and also in the US, the developed world. If you run into financial problems in Africa, you move to the rural areas and still have a good quality of life with minimal debt, at least it used to be. In the US especially, it's unfortunate most of us, about 99% of us live only a paycheck or two away from losing it all. This is a brutally honest and helpful post to most people and a motivation to really invest time on WA for an alternative should live throw a curve ball.Thank for the post and sorry you had to go thru this.
Zikora you provide an illuminating account of life in RSA when financial trouble strikes. Thanks for your info.
Cheers.
Edwin
Good financial advice, i have learned and will focus on some points as regards to my financial status.
Thanks for the advice am now in a situation that really need me and my wife to relook at our venture and take a very good decision pertaining our finances. Our business is now chipping away on our hard earned money due to the soft recession we are going through in RSA. However, WA seems to be offering a great deal of a rescue as well as you giving us more hope
Thanks for sharing what you are going through. My advice is to think of WA as a long term safety net that morphs into a wealth providing vehicle.
Others have done it, are doing it and you can too.The investment here is small compared to the real benefits you can achieve.
Cheers.
Edwin
Thank you so much for sharing this! I have not declared bankruptcy thus far, but getting a little nervous that can be in the future unless my debt relief company can take care of a situation that went south yesterday.
Like you, I had done poor money management and sadly racked up tens of thousands in debt from a combination of credit cards and loans. Thankfully, I found a debt relief company around the beginning of the year that agreed to help me reduce this debt and up to this point it had been working well until something happened yesterday which I was warned by this debt relief company could happen.
In about 3 years, I will be fully out of debt, but how this debt relief structure works (and has made me nervous and for good reason as I'll tell you fully what I briefly mentioned above) is that I immediately STOP paying the creditors and send them letters to stop debiting money out of my account. Surprisingly it worked. Next thing is that I start having money deducted from my bank account that goes to another special bank account that will be used to payoff these creditors as they negotiate with them for lower payments. So far, 5 of them have agreed for a much lower payment which has me happy and now here is where things have gone south.
One of the creditors has decided to take me to court and I got a summons to appear in my local district court in the middle of November. The debt relief company I'm working with is also a legal group and so I IMMEDIATELY called them and told them what had happened. They told me to fax the summons ASAP and they will immediately escalate it to their litigation team to get this taken care of since this creditor is in the debt relief program. I also took pictures via my smartphone and sent them to their email and I will fax the actual summons today from my job.
This is very nerve wracking and I curse myself for having let myself get into this situation in the first place. I really hope they can get this solved, but they have said they have lots of experience with this and have dealt with lawsuits of this kind before so I will see what happens next. I'm also concerned about another creditor that's in the program as well and supposed to be negotiated with. It is the largest single part of the overall debt I owe and this debt relief company has told me they are very aggressive and so I hope I don't get a lawsuit from them too. The representative did tell me though they have started to reach out to them so hopefully it doesn't get that point. Wish me luck!
Wishing you luck. Saying a prayer for you. Hang in there, looks like you have the right people on your side. "This too will pass".
Thanks for sharing your debt relief solution. It works. Trust your company. Their lawyers will handle your lawsuit. Make sure you maintain your agreed upon monthly payments.
If for any reason you have a cash flow issue and need to modify your payment plan call and speak to them. They are very helpful.
You got this.
All the best to you.
Edwin
I am going thru bankcurptcy too but Malaysia's law is different from yours. If i am bankcrupt, my house and car will be taken away. We r working very hard now to pay off our debts. I hope WA can help me overcome it soon
Hi Jon,
Consider WA as a long term safety net as it takes some time to build it out. You can use the skills you learn here to do a side hustle business where you can earn money immediately.
There were a few recent webinars that addressed this topic. Check them out via the Live Events archives. I highly recommend you do this.
I wish you all the best.
Edwin
Thankfully you've pulled through that experience with lessons learned and no bitterness. Thanks for sharing
No bitterness in the slightest. I was responsible and glad it worked out ok.
Cheers!
Edwin
I am glad to know that you could also recover, I had to abandon ventures for which I fought a lot. Thanks for sharing.
Hi Claude,
Everyone’s experience is different. Hope all worked out well for you. Despite the ventures you had issues with.
All the best. Cheers.
Edwin
Jojo, indeed there is. Everyone’s experience is different. But we came through ok.
All the best.
Edwin
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My wife and I filed bankruptcy 5 years after we married. Why? Medical claims. I had changed jobs and was in a gap of medical insurance. One of our tins was in the hospital for over a month. The bill was over 28,000 and that and ut other bills were unmnagble. We know a laywer through a friend and filed.
It was a wakeup call. We learned a lot. I hope othes never have to ge thought it. We drove old beater cars and sometimes had opnly $15 for a weeks worth of groceries. Hot dogs, penut butter were mainstays. All good now.
Wow your story strikes a chord. We shopped exclusively at the 99 cents store and made meals of ramen noodles with spinach and sausage mixed in. And some spices thrown in. Quite delicious actually. BLT sandwiches and tomato soup was another,
Guess what. We liked those meals so much we still make them!
Glad you came out of bankruptcy successfully too.
Cheers.
Edwin
I still have a love of those Ramen Noodles. When the power goes out, I can quickly cook some on my old one-burner propane stove. In the garage, with the door open, of course.