Home > Managing Debt > The Stages of Debt: Which One Are You In?

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Many years ago I wrote my original Seven Stages of Debt, as modified from the Five Stages of Death and Dying by Dr. Elisabeth Kubler-Ross.

Both experiencing the emotional loss of a loved one and the emotional loss of your financial life are similar in some distinct ways. However, the emotional stages of debt also have two additional components that a mortal death does not. And these stages are almost magical as they can lead to a new and better life for you.

When I was going through my financial troubles I distinctly remember passing through all the stages of debt. And in helping thousands and thousands of people over the years to deal with their financial issues I’ve clearly witnessed them passing though these same stages as well.

But people don’t pass through these stages in necessarily an orderly fashion, they may jump back and forth but in the end the healthiest way to deal with any debt problem is to acknowledge each stage of debt and be aware of how you are emotionally feeling at the moment. It will help you to understand how your emotional state at the moment may be clouding your judgment about how to deal with your debt.

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If you are living with financial problems right now I challenge you to identify what stage you are in right now.

The Seven Stages of Debt

1. Denial

Denial begins a long time before the financial problem rears its ugly head and gets in your face. Denial distorts reality like a street drug. It’s addictive. As an impartial observer, I’ve seen bad situations brewing time after time. But the person about to land in the sticky stuff often says the same thing, “It won’t happen to me.”

Whatever you are in denial about will wind up smacking you in the face like a cinder block on a rope. Even if you don’t know what that’s like from experience, I think you can imagine what kind of a mark it will leave.

2. Anger

Anger is an emotional waste of time and energy in most situations, especially when it comes to money troubles. Remember what I said before? Your situation just is what it is. You can be angry all you want, but things will get better faster if you can turn that anger into a fire inside of you that creates intense motivation to properly deal with the underlying situation and take positive action to repair the situation.

3. Depression

There is no question that money troubles aren’t fun. They typically lead to some kind of loss and that makes us sad and/or depressed. The loss can be anything from cutting out the cleaning service to having to sell your home and moving to a cheaper area. There is no doubt that some of the things you might go through may be difficult, but rather than stew over them, let’s put them into perspective.

Free Credit Check & MonitoringIf you had your choice of either dealing with what you are going through right now or getting poked in the eye with a sharp stick, which would you do? It’s a no-brainer, right?

Also, for some depression is rooted in brain chemistry. No matter how hard you try to lift yourself up, you may just need to talk to a psychiatrist or or doctor about medications to help you slip the cycle of depression. I’ve watched the miracle of recovery from depression in ones I love after they worked with a medical professional and were prescribed specific medications. It took a while to tune the dosage but the results were lifesaving for them.

Here is the easiest advice to give but the hardest advice to follow: Suck it up or take action and get medical help and let’s move on toward a solution. Bad things happen to good people. Life is unfair and sometimes cruel. It is what it is. Heard that before?

4. Bargaining

Typically, this is the stage when your higher power is brought into the mix.

• “God, I promise I’ll make all the rest of the payments on time if you can help me get out of this jam.”
• “God, if you can just bring my credit card payment current somehow, I promise I’ll go to church every Sunday/be nice to my kids/work really hard for the rest of my life/never buy a $500 pair of shoes again.

You can bargain with your God (or the Devil) all you want, but you might as well go outside and look for a four-leaf clover or throw some coins in a fountain. Bargaining is nothing more than wishing and wishing is okay, so long as it’s not your only plan.

Bargaining also sets you up for trouble if you bargain the wrong way with debt collectors or creditors. Some people make bargains to resolve their debt by promising payments they can’t make. They feel if they tell them what they want to hear it will make everything better. It won’t. The first time you miss a payment all bets and deals are off, or you make a big payment thinking the balance of your debt will be eliminated. And speaking of deals, if you are bargaining with your creditors or debt collectors, get it in writing. If you don’t, any bargain they made with you is worthless and trust me, I’ve seen too many examples of creditors or collectors that later deny they made any such bargain.

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5. Acceptance

You made it. Congratulations. I’ve been waiting for you. This is my favorite stage, even though the next two are where you start putting the pieces back together. I love the acceptance stage. It is so full of peace and leads people down the right path. Until now, you’ve been like a long-distance runner going round and round in circles, lost. Once you reach acceptance, you are turned in the right direction and now, instead of being tired and going nowhere, every step you take is in the right direction toward your new life, whatever that may be.

Once people reach acceptance, they know that what I said before is a fundamental law: Life just is what it is.

If you got your hours cut and you are not bringing home what you used to, it just is what it is.

If you bought a home that was too expensive and now you are struggling to afford the payment, it just is what it is.

If you’ve been unconsciously feasting at the all-you-can-eat buffet of debt for the past few years and now it’s caught up with you, guess what? It just is what it is.

6. Resurrection

Some time will pass after you take action and seek a way to intervene in your financial troubles, but slowly you will notice that you are starting to rebuild your financial life. You can even resurrect your good credit rating by following this guide.

If you are careful, you will be able to start saving money and buy a few luxuries again. It’s OK. If you lost your last home to foreclosure, you’ll be able to buy another. If your last car was repossessed, after you take care of that situation, you’ll be able to get another. (After my bankruptcy I drove a $500 used Postal jeep until I could save enough money to buy a better vehicle. That jeep was an accident waiting to happen. I held my breath every time I turned a sharp corner, praying the darn death trap wouldn’t overturn!)

Gradually, you will start to see that what I’m telling you is absolutely true. Now, you might not have as much stuff as you used to — you might not have the three-car garage and beautiful home on ten acres — but you’ll have what life wants you to have and you’ll find greater joy in it.

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7. Rebirth

Your life will have changed noticeably once you reach this stage. The experience of surviving your financial problems will have made you a stronger person; a different person; a better person.

I firmly believe you can lead multiple lives within the one that exists between the time you were born and the time you die. We grow, evolve, learn and change. We grow apart, grow together and just plain grow old. Your life can be so much more than the struggles you are going through right now. You didn’t get into debt overnight and it’s probably going to take some time to be reborn, but trust me, you’ll be a better person for it, if you want to be.

Click here to read the original article: The Seven Stages of Debt. Which Stage Are You In?

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  • Margaret G.

    I have never been in debt and have the highest possible credit scores. However, this recession has made me even more aware of what I buy and what could happen if good judgment is not used in these matters. My main word of wisdom, not only to myself, but to others is, -“stay out of stores unless you have something specific that you need to buy, a necessity”. Otherwise, idol browsing can lead to unnecessary purchases. Maybe one doesn’t think a $25,00 or $30.00 purchase is a “bank buster” but an accumlation of these can breed “money trouble”. When bored, find other amusements, – not shopping. Buying things can give you a “temporary euphoria” but when the credit card bills start arriving it will be “gloom and doom”. This has been my criteria for “staying out of trouble”.

    • http://www.credit.com shirley

      how do i get things off my credit report that don’t belong to me. I have been divorced for 8 yrs and there are things on my report that belong to the ex w/ my name on them after we divorced. Don’t know how he got this done but he is very slick and a smooth talker. great con-artist.
      Thank you,

  • Johanna

    I was in denial to the tune of $80,000 and none of that was real estate. I went thru the bargaining, anger…but then that anger got the best of me and I decided to buckle down “put on my big girl panties” and pay it off. I forfeited vacations, eating out, new clothes/shoes. I stayed out of stores. I shopped at the super cheap markets and ate lots of beans and rice. I paid off every dime within 3 years.
    My advice is to put your anger to good use and PAY OFF YOUR DEBTS if there is any way possible.

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