Bankruptcy, it’s been said in these pages, is a debt-laden person’s least-worst option. It doesn’t take you all the way down to the ground, but it takes you to hovering just above it. So what’s that terrifying ride like, and how do you climb back up? We asked three men who’ve been through it.
Bernard, 49
Back in the mid-2000s there was the real-estate boom, and home values were going up everywhere. I jumped into the market and bought a bunch of properties through what turned out to be predatory lending. I put no money down, and lending practices allowed you to take supposed equity out of your home without a lot of checking on the lender’s end. At least, that’s what this lender that was hounding me was doing.
At one point, I had 13 properties in three states. A friend of a friend had called me one day and started talking about real-estate investing and totally sold me, so I decided to move to Phoenix to work with him and another guy to purchase and flip homes.
They turned out to be shady as shit. After a year or so, I started realizing that a lot of things they were saying weren’t true and that some money that I “gave” them to invest ended up disappearing. They had excuses for it, but stupidly — I should have protected myself better — I didn’t have any legal recourse to get it.
It got to the point where I stayed in town not to work with them, but to try to figure out a way to recoup my money in some way, shape or form. That never happened, and when the market started to drop — and eventually bottomed out — I couldn’t afford all those properties. They were worth less than what I picked them up at. I had mortgages to pay, and I was in the tens of thousands of dollars in the negative each month.
The first thing I did was let everything default because there wasn’t anything I could do. I also had credit card debt and an auto loan. Unfortunately, the banks know that when you start defaulting on one thing you’re probably gonna default on everything else, so all your credit cards get canceled. It’s like they know the pattern. Creditors were blowing up my phone. I’m obviously not going to pay these people back — I can’t. I need this money to survive and eat, and I’m trying to pay back people I borrowed money from — it’s not going to these guys.
I was in a deep, dark place. It wasn’t a good time for me: I’d been duped. I’d borrowed a lot of money from friends and family and gave it to those business partners, and although I’m normally a positive guy, I fell into depression. I couldn’t eat. I was losing weight. I hardly slept. I couldn’t leave the house. It was almost like it was hard for me to move. I actually considered — I don’t know if I could do it — but I actually considered suicide. They were dark times.
But later, there was a kick-myself-in-the-butt moment. I realized what I had done, and it was like, well, you can stay a loser, or you can pick yourself up and try and be a winner. I just exploded. It was like a reset — I reset my personality in particular. I was always shy and reserved, especially around women, but I started going out and meeting tons of ladies, and I eventually met my wife.
I moved back to my hometown, and there, a friend recommended bankruptcy. It seemed like a way to wipe everything out. When I showed up in court, I remember being in a room with a bunch of other people who were trying to file bankruptcy. We each had to go up there, and individually, the trustee would drill us with questions. He was one of the most intelligent guys I’d ever encountered. It was almost like when he looked at you, he was dissecting you. I imagine some people try and fudge stuff just so they can get away with things, but I’m not a good liar, so he could tell that I really was fucked. He gave me the stamp of approval without much fuss. I got to keep my car and I got to keep my 401(k) from a previous job. I didn’t have much else — all the properties had been foreclosed on, so I didn’t own them anymore.
It was definitely a relief — almost like a starting over. I felt like I was at zero. I was positive for the first time in forever, because I still had my 401(k) and whatever my car was worth. Fortunately, there’s a disconnect between you not actually having money and your ability to find a job and work, so it was pretty much life as usual. I still did real estate — I got my license in my home state, and continued doing that for a couple years. I wasn’t making a lot of money, but I was making enough to get by.
I built my credit back up, too. After I was discharged, my score was in the 400s. I slowly started opening credit cards. Obviously at first they’re like, “Okay, your limit is $200.” So I would charge something for $20 or $40 and just pay the minimum every month. Then when I’d pay it off, I’d charge another small thing, just so there was some credit history. It was a slow process. When my wife and I bought our own house, my wife’s name was on the financing, but when we moved a couple years ago, I told the lender, “You don’t wanna put me on there — I’ve been through bankruptcy.” But by that time my credit score was 700, so I could be part of the financing.
If anything, bankruptcy is kind of unfair for whoever had to absorb that loss of mine, which was the financial institutions — and was one of the leading causes for the recession. So I have to admit I was part of that. The whole thing was a big financial lesson. After that bankruptcy clears, you’re like, “Okay, I’m not being stupid anymore.” My whole financial outlook has changed. You start thinking about that $60 you’d spend on stupid shoes or pants, and how you could have used that for food. I don’t recommend people go through bankruptcy, but it’s an eye-opener.
Orville Sharp, 28
I was in a committed relationship, and things went south. Going from depending on two incomes to just mine started to make things difficult. When me and my children’s mother decided to split, we talked about what we’re gonna do about the things that we accumulated together. The majority of everything was in my name, so I was responsible for it. It was just, “Are you gonna still contribute to pay this off?” And when that answer was no, soon I went into collections.
Then I started getting letters from law firms. I was thinking, is bankruptcy the route that I should take? I did some research to find out if I’d be able to bounce back if I did everything on my own, but then the first collections letter came, then the second one. I was like, “Oh, this stuff is quick!” It probably took like six months’ worth of missed payments. So I scheduled an appointment with a lawyer who said, “Let’s put everything down on the table and I will tell you what it’s best for you to do.”
When I went to court, I was the youngest person there. That’s when it all hit me: I’m like, “Orville, why are you here?” I’d get calls from creditors multiple times a day and I found myself repeating myself over and over. One of them was even from way back, when I was 18 or 19 and I got a payday loan — I thought I’d paid it off, but I guess I didn’t. It didn’t make sense to ignore and send them to voicemail, so I’d pick up the phone and tell them the same thing over and over and over and over again: I filed for bankruptcy. They legit thought I was lying, though. I guess it’s a thing when people lie and say that they’re filing for bankruptcy, so I’d tell them I have an attorney, and you have to call her. I’d reach out to my attorney like, “Umm, they said they’re gonna sue me.” She said, “You don’t have anything to worry about — they say that to try to get you to pay.”
She and the trustee were also like, “I don’t want you to make any payments on anything besides the car.” I had to keep paying the car because you want to keep that. One of my credit cards was in good standing, but they were just like, “Stop paying that, just pay the car note.”
When I got discharged, it was a relief. The first thing I did was get a credit card. Now, I know that sounds crazy, but it was like, “What am I going to do next in order to build credit?” I want to buy a house when I’m 30, so I had to get a secured credit card. I put $200 down on the Discover card, because my credit score dropped to like 400. That thing dropped like, boom, boom! But now I can do everything on my own.
I keep finding ways to cut costs. I’m just like, if I don’t utilize this, it gots to go! Now I balance my books, I’m keeping track of my money and I read books from Dave Ramsey. I check Credit Karma every day. I do a lot of research because I don’t want to make the same mistake twice. I cut cable because I wasn’t utilizing it. Car insurance, I’m always searching for lower prices. When it comes to gas, electric and water, I’m just like, “If we don’t need it, turn it off!”
I would say I’m doing pretty good. Even though my bankruptcy discharged in May, I have three credit cards and one personal loan. My credit score is at 653. I talk to my mom about my new financial literacy all the time. Because I came from a family where there were so many bad habits. I started off with those bad habits, too, living paycheck to paycheck, going to payday lenders because I thought that was life. I’m trying to right that wrong. My oldest is only eight, but I have her look over my finances, like, “This is how much money daddy’s working with.”
Still, if I could go back in time, I would’ve never gone through bankruptcy. I would’ve called the creditors and made a deal, because there are ways around it, from the research I’ve done. That $1,800 that I spent on the attorney, boom — that’s money right there that could’ve been used to pay down some of the debt. Because having this on my credit, it’s gonna be seven or eight years before it falls off.
Mike Phillips, 58
I left home at 19 years old and always paid my bills — right up until I lost my health at age 53. The IRS says the number-one reason for bankruptcy is loss of health. True, in my case.
I was diagnosed with Hashimoto’s disease in January 2009. I was on an experimental treatment that worked well except for severe headaches. My energy had fully returned — the Hashimoto’s markers had returned to normal, but the headaches were horrible. I took a thousand Advil in 10 months, so I had to stop the treatment. That stopped the headaches, but soon my health tanked for other reasons.
I became a condo property manager at a property where there was a dangerous lack of repairs, and hundreds of thousands of dollars not collected from the owners to pay for the repairs. Those were my two primary functions: Collections and repairs. I did some of the maintenance work myself, as well as managing the five crews I had hired to make the place safe again. I was also an owner of 18 years in this condo complex, so it wasn’t just another job.
The entire community had gotten away with financial murder when I came along to manage it — a few hundred thousand missing dollars. Thirteen tires on my vehicles were slashed; windows smashed; engine oil drained out; vehicles tagged. As I got the buildings and the grounds repaired, good people saw the good that was occurring. The rest were mad as hell that they had to pay their debts of thousands of dollars each. A few bad eggs were even convinced I was stealing some of the funds I was collecting. Ironically, the funds were mailed directly to the collection company, not to me. I accounted in writing for every dollar spent in repairs.
In the end, I think I embarrassed the people in charge for not doing their jobs. I published my findings and actions in the monthly newsletter so everyone knew what had occurred. But the board of directors filed a lawsuit because they thought the customary management tasks I was performing were illegal. They had never done any of the work I was doing, so they were completely unfamiliar with running the business. Attorneys told me they sued me to bully me. They lied an awful lot; I suffered an awful lot.
I had $14,000 in credit card debt, $95,000 in attorneys fees and $227,000 mortgage debt. I was told that filing bankruptcy would stop the lawsuit costs only months before I filed. My health had failed so I couldn’t work to pay my bills — bankruptcy was the only way to clear the debt.
The lawsuit basically expedited my filing for bankruptcy — the credit card debt was going to make me file at some point anyway. I represented myself in court for most of the lawsuit, as I couldn’t afford my attorney. I also counter sued them for back wages and reimbursements that were never paid, in the tens of thousands of dollars. During the process, I was on antibiotics five times in 12 months. I was chronically ill for over a year — a lawsuit and eventually bankruptcy were crazy stressful.
I sold my 1994 F150 for $2,700 and put the funds into my home. I also had a couple of beater vehicles that weren’t worth much, except to me. I was allowed to keep them and my home. I eventually had to sell my home before foreclosure was going to hit just days later. I had months of help from friends that gave my home a serious makeover — the sale funds allowed me to buy a fixer-upper cheaply in a depressed area of Arizona, and pay off the debt to friends that had helped me so much.
The relief from bankruptcy in January 2017 was overwhelming. For months, I expected the other shoe to drop. I was just jaded from the entire experience. I was very distrusting for a long time.
I am fully disabled, though, due to Hashimoto’s disease. I’ve applied for disability, and I’m selling off my various collections — decades of collecting antique radios and other electronics — to pay bills. My credit score used to be over 800. Now it’s 540. Luckily, I haven’t needed any loans, since I own my home and my older vehicles. I did try for an Amazon credit card once, but it was turned down because of the bankruptcy. I never knew that fighting for what’s right could ruin my health.
Adam Elder
Adam Elder is a writer in San Diego. He's also written for Esquire and WIRED magazines, VICE, The New York Times, The Wall Street Journal, The Guardian, newyorker.com and elsewhere.
