Bankruptcy - an elephant in our living room

Most of the time, outside influences can impact a business and send it reeling toward bankruptcy. But as you watch Freddie Mac and Fannie May, it was juggling the books to move the crushing debt into the future.

Now why would I talk about these mortgage groups here? Because their failures affect home owners and in turn can impact the small business.

I have a saying that I live by:

It's not what happens to you, but how you deal with it that makes you who you are.

I have seen families cheat, steal money that put a business out of business, but that's different. That closes the business, but you walk away with some debt, maybe, but no need to declare bankruptcy.

Bankruptcy is triggered by losing control of your finances to the point that not only can you not pay, but cannot pay for months on end. Some business are pushed by outside circumstances, but it can also happen by short sightedness. Losing an Investor can also trigger the conditions for falling toward bankruptcy.

It's happening more often and to more people we know. Small business by its very nature demands the owner's attention. It's always personal, and it always hurts when you have no other choice than bankruptcy.

This is a very interesting discussion. Thanks, Leila, for stepping out in vulnerability.

This bold step in addressing a delicate, stressful topic that clearly has far-reaching and deeply emotional implications serves at least three great purposes:

• It helps people contemplating this tough decision realize they are not alone and are not bad or worthless.

• It offers insight into how people have dealt with the process, and particularly with the aftermath.

• It allows those who have gone through bankruptcy to give hope and compassion to those who feel hopeless.

I do have a question:

Since there are fees associated with the bankruptcy process itself (and attorney fees to boot), how does a person wondering how they are going to pay their rent or purchase groceries file for bankruptcy in the first place?

Right now I am struggling with the overwhelming credit card debt that my family is now finding themselves in due to the horrible mortgage and housing crisis. So far I have managed to get everything paid on time, but I continually live in fear of that first late payment. It is constantly at the forefront of my mind. That coupled with my actual mortgage payment are keeping my in this kind of "panic" state. I don't know much about bankruptcy other than the fact that I have tried to avoid "needing" to know about it. As I sit here writing this I am actually getting a lump in my throat and a sense of dread. Any advice...anyone....

Hi again Everyone,

The honesty in this small online community is amazing. Rarely in the business world do I get to hear this honesty.

Good for you for being real.

One of the things I tell everyone I talk to who mentions finaces is to keep a log of EVERY penny spent for three months. This is a huge hassle. However, it allows you to see exactly where all of your hard earned money is going. Every latte, every trp to your favorite reseaurant, every time you buy a bagel. Everything. I carry abound a small spiral notebook in my small purse. Plus I keep all of my receipts. I have been keeping tract since mid 2004. My spending is way, way down. I got embarassed by all the fluff and unnecessary stuff I purchased, so I stopped spending.

Not to make light of how you feel, panic seems to be normal these days. Fear can be a great motivator. True courage is not the absence of fear, but action in spite of fear.

I tell people to take some time in a quiet, safe place and get really really honest with themselves. To ask themselves what they really want out of life: what they want to do for a living, who they want to spend their time with, what they actualy need and what they can do without. They ask themsleves what they want to look back and see when they are 85. This takes awhile but gives people valuable insight that they can work with.

Some ideas to start with. I hope that they are helpful.

Take care, Karen

Marty, I can feel your pain. (Literally, I feel the vibrations your words are giving off.)

No, I haven't declared bankruptcy, though I've dug myself into pretty deep holes a couple of times.

I've done a lot of coaching with people, mostly women, who have been through bankrupties and/or foreclosures. The financial impact is probably not as profound as the emotional impact. Shame, regret, self-judgment... these are not fun things for anyone to carry around on their shoulders.

Can you find it in your heart to forgive yourself? You only did the best you could. You had a noble cause, and you probably did a lot of things right. (And even when I was on the verge of a financially failed business years ago, I knew that I would have had huge regrets had I not tried.)

You might have lost your financial nerve for a long time, but never forget that your net worth and your self worth are not the same thing. The human heart is resilient. So are bank accounts.

Take good care of yourself. You're hurting, and I hope you'll be gentle with yourself.

Jacqueline, I hear you. I've been in the state of barely skating each month between credit card payments, barely making it from paycheck to paycheck (yes, this is from when I was employed full-time!).

It is terrifying and so much "easier" to just hold your breath and hope it works out each month...but I think that's also the road to serious trouble.

My advice would be to get in touch with a financial coach like Kate who just posted here. Talk to a trustworthy professional, AT LEAST for the free consultation, to see how they can help.

Trust me, avoiding the issue isn't the answer.

These days, I do the same that Karen does: I track every single penny that comes in and out of my life. I know ahead of time whether the money will be enough for the bills, and I have time to adjust my plans and spending to stay on the good side of all my financial obligations.

Take a deep breath and open yourself to some help.

Getting good advice as early as when you first meet with a bankruptcy attorney on credit repair will go a long way in getting repairing your credit. There are a lot of tips and short cuts to increasing your score. Don't wait until you are discharged from your bankruptcy to start. Check out www.bulldogcredit.net to learn more. After looking at 1,000's of credit reports, you can really notice the people that are proactive after they are in bankruptcy.

I need to run out the door, so this may not be my best piece of prose, but just wanted to share a couple things that I hope will help:

"Debt means someone had so much confidence in me that they invested in me." People don't like to be told they are wrong, so, when I was struggling, I felt the need to take advantage of every opportunity to turn things around, and that started with turning my perception of circumstances around.

I had multiple types of debt to resolve - 1.) Financial and 2.) Health (I was the recipient of an organ transplant.) Of the two, quite honestly, the one that I had the hardest time living up to, by far, was the health...until I realized that I have the power to live up to it not despite it, but BECAUSE of it.

Yes, it was easy to beat myself up when something didn't go the way I wanted it to. But I learned so much about myself and life during the transplant that it helped me pull through the financial debt, and one of those things is that taking the easy route isn't necessarily the best route. (No fair giving up - the rest of us need your talent!) I also recognized that I had the power to come through the worst things people face, and that I can use that power to not just live through it, but also to excel because of it, and to help others do the same. And, I also know, because of those events, without a doubt that you are not what happens to you, what others do to you, or even what you do.

Marty, you are so much more than the "failure" that you mention that you feel like. You are SO much more. You are caring, you are honest, you are a son, you are responsible, you are passionate, and you are so much more than even those things. You may need to dig way down deep in order to find a way to use all this in your new business - if I can do it (and I did) I know you can do it as well. But please take the time and energy to do it. I received my transplant over 22 years ago, and still identify new gems from it, to the point where I now know that my best strengths were born in those moments where I had to struggle most. I wouldn't want to be here without having had that experience.

One of the things I gained from those experiences is the strength of vulnerability. It shows that I have integrity. It helps me reach out to others who are feeling vulnerable. It helps me know when there is a problem, and it helps me be willing to reach out to others when I need help. In fact, it is partly due to that experience that I have started the business I now have. Maybe your new business will be born of your experience as well.

I filed bankruptcy right after my divorce came final. I learned (1) do NOT share an attorney with your soon to be ex husband to save on costs and (2) pay attention to your credit when you're tied to someone else.

My new attorney helped me finalize the divorce and bankruptcy and he gave me a list of things to do (apply for 1 credit card, pay everything on time) and a year later I was approved for a mortgage, two years after that I was moving into my next home.

Granted the happy days of free money helped me get approved although my credit score was crap, but having that first mortgage and a good payment history helped my score climb quickly.

The bankruptcy (oh and there's a foreclosure too, remnants from the divorce) are still on my history, but they should be dropping off soon.

There is life after a bankruptcy.

Not only is there new life after bankruptcy but this topic has risen with a new life one year later.

Leila... Are you ready to share some new wisdom gained a year after starting this discussion thread? Seems it might be helpful to a few new Bizniks.

Anyone out there wanting to share for the benefit of those that might feel alone?

Reiterating Leila's last question posed: "How did your bankruptcy happen? What w/could you have done differently (if anything) to avoid it?" ...Howard

My business bankruptcy of 38 years ago happened because:

I did not pay the government first and thought I could borrow from them when I ran short on cash to make payroll.

Stupid, stupid, stupid. My advice:

Never, ever, operate a business without paying the federal government their due first. Other creditors will usually help you work it out but your Uncle Sam will just take whatever you have.

That's one lesson I learned from bankruptcy. I learned others, but I'll save them for another time. Do you have any lessons to share? ...Howard