For Marilyn Kleinberg, the decision to file for bankruptcy was difficult, but dealing with what the bankruptcy said about her was even more trying.
“It was a mental thing for me,” Kleinberg said. “I could not file bankruptcy. It meant that I had failed. But I came to the point that I had no other option.”
After leaving a job with benefits and a salary to start a travel agency business in 2006, Kleinberg soon found herself spending way more than she was taking in.
“There was no cash flow, so I started to pay my loans off with my own money and within two years I had nothing left.”
Kleinberg filed for both personal and business bankruptcy in 2009 after finding herself tapped out of cash and with more than $100,000 in business and personal credit card debt. That was in addition to a home equity line of credit that had maxed out at $100,000 and a Small Business Administration loan of $150,000 that she couldn’t pay.
When she went to meet with a bankruptcy attorney to begin the filing process, she broke down in his office.
“I met with a lawyer and he basically handed me a box of tissues and I just cried,” she said. “He said that was pretty common.”
The Truth Hurts
Bankruptcy is one of the most difficult financial events a person can experience, affecting your financial and emotional health. A bankruptcy can stay on your credit report for up to 10 years after the filing date, which means that the impact of a bankruptcy can stay with you much longer than a missed credit card payment or even a foreclosure. But does a bankruptcy also carry a social stigma that will follow you around?
Ric Morgan, an author and entrepreneur from Tennessee, filed for bankruptcy in March 2012 after racking up more than $350,000 in medical bills. He said he didn’t experience any type of negative stigma when it came to filing, but mostly because people understood high medical bills.
“When I told people that the medical expenses had become too much, they all said ‘Ahhhh.’ I think everyone fears it.”
Morgan said he did initially feel a sense of guilt at his inability to pay all of the bills.
“I see credit as a trust. They trust you to pay the bills,” he said. “For me, the feeling was that I was violating a trust. But then you realize you are up against something that’s not your fault.”
A Way Out
After leaving the hospital, Morgan had more than $10,000 of credit card debt from co-pays alone. When he contacted a lawyer to begin the filing process, Morgan’s attorney told him that the only cases he was willing to take on were medical debt cases because legislation had made it so difficult to allow people who had overspent to qualify for the bankruptcy protections.
After completing the bankruptcy process, Kleinberg said she only was able to save her car, but emerged optimistic.
“I chose not to dwell on the negative.”
Currently, she is the executive managing director of the Southern New Jersey Chapter of eWomenNetwork, an organization that helps women network and make business connections. She blogs about her bankruptcy story and says she has found that being open about the process has helped others share their stories with her.
“I refuse to allow that to brand me,” she said.
Image: Fried Dough, via Flickr