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Bankruptcy - My Personal Experience, The Good, The Bad & How It Saved My Life | Real Life Story

Updated: Feb 22, 2023

Trigger Warning: This post contains stories of depression, suicidal thoughts and a mention of a suicide attempt.

What is it like having to make yourself bankrupt? Nobody ever expects they will be bankrupt at some point in their life; certainly, nobody would want to go bankrupt, but what if it's your only option, and doing so could literally save your life? Here's what happened to me and what's happened since.

What is it like having to make yourself bankrupt? Nobody ever expects they will be bankrupt at some point in their life; certainly, nobody would want to go bankrupt, but what if it's your only option, and doing so could literally save your life? Here's my personal experience of bankruptcy.

In 2017, the American food import business I had run for some five years and had been successful, growing in sales year on year, found itself in very severe financial difficulties and was forced to close due to the EU food import laws changing and meaning that a vast number of products we had been importing for a very long time and had become a significant part of our business and profits, were no longer allowed to be brought into the country and sold. This wasn't just the odd one or two products; this was dozens and dozens of popular products! This meant that sales plummeted, our cash reserves depleted quickly, we were no longer profitable, and the bills started to stack up. I had to dissolve the company before things became more out of control.

This closure left me with hundreds of thousands of pounds of personal guarantee business debts that, after some time of trying to pay off what was owed, it became apparent that there was simply too much debt for one person to pay with little in the way of income; after all the closure of the business meant I had also lost my job, as had my staff. The monthly payments were eye-wateringly high; I had to apply for personal bankruptcy, as I was not going to be able to pay off the massive debts in my lifetime, and this was affecting not only my finances, or lack of them, but also my mental health.

Bankruptcy was an unbelievably difficult decision to have to make; there is a stigma about bankruptcy, and people who are facing financial difficulties experience feelings of shame, guilt, and failure and may see bankruptcy as a confirmation of these negative emotions. It's important to recognise that bankruptcy is a legal process designed to help people get back on their feet when they are struggling with debt. It is not a sign of failure or a way to cheat creditors but rather a way to regain control of your finances and start over with a clean slate and a fresh start.

For me, the debt wasn't due to any financial irresponsibility; it was down to changes beyond our control that badly affected the business and was beyond my control, but that didn't make me feel any less responsible for being unable to pay bills and my failure to pay the bills myself.

The barrage of bailiffs knocking on my door, constant phone calls, and daily debt-related letters were unbelievably stressful. Seeing a debt collector walking up the driveway would make my heart sink. I've never felt as lost and out of control as I did at that point.

There is no doubt in my mind that if I hadn't taken the bankruptcy route, I wouldn't be here today. The pressure was so much that I constantly thought about ending my life. I attempted to end my life at one point; in the middle of the night, I drove to Beachy Head in East Sussex, intending to jump from the cliffs. If it wasn't for a police car patrolling the area and entering the car park where I was sitting in my van, and it just waited there with its headlights lighting up the van until I drove away, I suspect that I would have gone ahead and jumped.

Knowing that I could end my life when the pressure maxed out was the one thing that kept me going strangely. I remember saying that to my doctor, and I've never seen someone look at me so concerned! But it's true it was my way to stop everything that was affecting my mental health so badly. I had a child and had to pay child support, a fiancee and another baby on the way, so I wanted to be there for them, but that absolute feeling of having lost control, having no purpose and the absolute lack of hope for things to improve was overpowering.

Making the decision to apply for bankruptcy protection was really scary; I had visions of going to court and explaining in detail to a judge and everyone else in the courtroom why I could not pay my bills, why the business had gone bust, and feel ashamed. Some scum of the earth who was defaulting on paying bills I had signed to say I would pay should something happen and the business cannot pay.

That's a scary prospect for someone that didn't even want to go to the door when the doorbell rang, as I found myself scared of what opening that door might result in; will it be the post with a signed for letter from a debt company, or worse still would it be a bailiff wanting to come in to list what I had in the house, that they could sell to pay off some of my debts; so I had a genuine fear of having to be around people and have to explain myself when all I really had been doing and wanted to do, was to lie down on a bed in a darkened bedroom and try to block out the depressive thoughts in my mind. Six years on, I still feel apprehensive about letters coming through the letterbox and answering calls from numbers that I don't recognise on my mobile phone; it takes time to recover from that sort of feeling of complete lack of control and fear; I'm not sure if I'll ever recover if I'm honest. It was financial ruin, plain and simple.

So, one Sunday afternoon in August, after much soul-searching, I sat down with my partner, and we filled out the online bankruptcy application together. Filing for bankruptcy isn't free; it was over £600 to do this (currently, it's £680), and I had to put this charge on my pregnant partner's credit card (even trying to clear debt, put our family even further into debt!), as I was maxed out. I hovered over the submit button for what felt like hours, but it was probably just a minute, and I hit submit.

I didn't expect to hear anything for some time; after all, it was a legal process, and the bankruptcy proceedings were bound to take time, but I was wrong; the next afternoon, I received an email saying that my bankruptcy application had been processed and attached was a copy of my bankruptcy certificate! Less than 24 hours after applying, I was legally bankrupt!

There was no bankruptcy court, no court proceedings, and there was no judge! I was allocated an agent for my bankruptcy case and was contacted by her a few days later, where we ran through my financial information, my financial situation and the outstanding debt, and I gave a brief account of what happened. As it happens, she was also dealing with my company's collapse, so the two cases matched up, making things easier for her.

As it was slightly more involved, due to the company aspect, I met my case worker at the Insolvency Service offices in Croydon (which I was terrified about). I was expecting a Gestapo-type grilling with lights being shone on my face. In reality, I spent two hours talking to a very friendly and understanding lady in a meeting room and we went through the remaining debts; she explained how bankruptcy works and my financial obligations in a non-judgemental manner. I walked out of that meeting room feeling like a monstrous weight had been lifted off my shoulders. I went and sat in my van, and I cried. For once, it was tears of relief, not frustration.

The bankruptcy process was easier for me than it might be for others, as I owned nothing of value; the only thing I had that was actually mine was a TV and a van, and neither of those would be taken from me! If I had my own home and money in the bank, a nice car, expensive clothes and other nice things, these might well have been taken from me to help pay the bills, but I had none of these things, making things much easier.

My bank accounts were in a minus, not a plus. I had nothing else of any value, as I was renting and didn't own a house any longer (I got divorced a few months earlier, and my share of the property I owned, I had put into the business to try and pay off bills to keep the business running, which although was helpful, it made no difference to the overall closure of the buses, but did leave me with nothing!). For this reason, I didn't have to give away/sell anything I owned to put towards the debt; I just got the opportunity to start fresh.

I sent all the people I owed money to copies of my bankruptcy certificate and my caseworker's contact details, and from more or less that point, the letters, bailiff visits and all calls stopped. The relief of knowing that even if I opened the door to a bailiff, I only had to show them a copy of my certificate, and they would walk away, it was an incredible feeling; there isn't a word that would explain that feeling of relief, although I guess, in the weirdest way, it's the relief you feel when you've been on a really long journey, with no access to toilets and you've drunk three coffees and feel like your bladder is going to burst if you go over one more bump in the road, and then you find a service station and get to relieve yourself... it's that level of relief, satisfaction and a general sense of well-being that having this protection from creditors brought to me.

Six years on, in 2023, I still suffer from the financial impact of pressing that submit button all those years ago. What you have to remember when you apply for bankruptcy is that it will stay on your credit file for six years, and that's very bad for your credit score and credit rating! It's about the most damaging thing you can have on your credit report. It will severely impact your likelihood of getting credit, personal loans, home mortgages, or possibly being able to rent a property. In some more extreme cases, such as working for a financial institution, it may even affect your likelihood of employment as well, so you have to accept that it's going to make a significant impact on your life; it's not a simple financial reset where you start again, and everything bad is wiped from your credit file, and it's blank, far from!

You'll need to learn to live within your means as you are unlikely to get access to a credit card for some time. When you do, it will likely be a higher-interest credit card with a far lower limit than you might typically expect, perhaps just £200, and this is because financial institutions now consider you to be high-risk and aren't going to offer competitive interest rates, nor higher limits, as your track record now shows that you are an increased risk for not paying them back what you've borrowed from them! They assume you are more likely to get yourself into credit card debt.

This means that you do not have a backup source any more for purchasing; you can't ' just stick it on the credit card' anymore; if you don't have the cold hard cash in your bank account (and you may need to change your bank as well because some banks will close your account when declared bankrupt, and yes they are advised that now bankrupt!), then you can't buy it, it's that simple.

If you don't have a credit card, it also means you can't hire a car as they need to swipe your card; even booking a hotel room can become a drama as they often won't accept a debit card on a booking for any additional purchases you might make when staying with them. What about emergencies when you might use your credit cards, such as the washing machine needing to be replaced suddenly or your car needs urgent repairs; without a credit card, your emergency fund, which many people use a credit card for, is not there, so you need to fund it using the actual money that you have in your bank account, and for many people, especially at the moment, that might not be possible!

Bankruptcy is not a 'get out of jail card' and shouldn't be applied for expecting it will be; it has long-lasting ramifications that will cause you hardship and mean you may need to drastically change your spending habits, which in turn may affect your quality of life.

I've struggled over the last few years; it has been a real eye-opener to see how much I used to rely on credit and credit cards. This experience has made me far more frugal and able to live within my means, which is no bad thing! Even little things you might have previously taken for granted can suddenly become significant decisions.

I remember stopping at motorway services and looking at buying a sandwich as I was really hungry, and I looked at the prices and looked at what coins I had in my pocket, knowing I couldn't use my debit card as it would leave me short on rent, as we had exactly the right amount in the bank account, and realised that I had precisely the right amount of money in my pocket and normally I would be chuffed and purchase the sandwich, but I knew if I spent all that, I would then have zero money, and relying on yellow sticker food to subside our grocery budget as we were that skint, I knew I could probably feed my whole family on those coins if I shopped frugally, rather than being able to buy one sandwich, (the cheapest one they had), and so after a bit of pondering, I remember coming to the decision that it was my fault I was bankrupt, and couldn't afford to buy lunch, so I refilled my water bottle for free, from a water fountain, and instead of eating, I drank a whole bottle of water to fill me up and then refilled the bottle again and drove off having spent nothing, and thats the frame of mind I adopted, and frankly, its not done me any harm.

This August, I will be six years into my bankruptcy. You are classified as bankrupt for one year (usually), and once that one year is up, you will be given your bankruptcy discharge, but the bankruptcy 'black mark' stays on your credit file for another five years, after which it is erased, and your credit file will no longer reflect a bankruptcy on your record. At that point, your credit file is more likely to show you have good credit and more new credit options will likely become available to you, including mortgages (which for me is something that's really depressed me, as I really want to own a home again, and at nearly 50 years old, time is running out!), and especially, if you've made sure any credit options you have been offered while bankrupt, have been appropriately used, e.g. no missed payments or defaults, it's likely you will have far less trouble obtaining credit or credit-based services, (even simple ones such as an overdraft or interest-free credit options), which puts you in a far better position financially, and should mean the end to your six years of financial troubles.

So August, for me, is a milestone; it should open up far more financial avenues for me and be the end of a challenging time in my life. Yet I've learned so much from not having credit, relying on what I have, and finding ways to pay the bills when times are tough; I'm not going to change my more frugal ways of doing things just because I'll have access to more lines of credit. Why would I want to get back into debt again? I'll continue to spend in the cash-in-my-pocket method, it works, and leave any extra credit for emergencies, but I will get going on a mortgage as soon as I can, though; that's not an irresponsible debt; it's an investment!

So here's my advice if you are in a similar situation with debt, deal with your debts, don't let them impact your life, possibly even end it, and don't bury your head in the sand; it does nothing but prolongs and probably increases the problem! Bankruptcy is really serious and should be a final resort to debt management.

There are several ways to deal with debt in the UK, depending on the amount of debt, the type of debt, and your individual circumstances. Here are some options:

  • Budgeting and prioritising debts: Creating and prioritising a budget can help you manage your finances and reduce your debt over time. Make a list of your debts, including interest rates and minimum payments, and then focus on paying off high-interest debts first while making the minimum payments on other debts. Speak to the creditors and see if you can set up a manageable repayment plan with them; they will often prefer this to have to go down the debt recovery route. All debt payments help reduce down interest and the amount you will eventually end up paying. If you have some extra income, use this to chip away at your debts.

  • Debt management plan (DMP): A DMP is an informal agreement between you and your creditors to pay off your debts over time. You make a single monthly payment to a debt management company, which distributes the money to your creditors. This can help simplify the process of repaying multiple debts, but it's important to note that not all creditors will agree to a DMP.

  • Individual Voluntary Arrangement (IVA): An IVA is a formal agreement between you and your creditors to pay off your debts over a set period of time. You make a single monthly payment to an insolvency practitioner, who distributes the money to your creditors. IVAs are legally binding agreements, and they typically last for five years.

  • Debt relief order (DRO): A DRO is a way to have your debts written off if you have little or no income, few assets, and less than £50 left over each month after paying your essential living expenses. DROs last for one year, after which your debts are written off.

Before you do anything, seek independent financial advice or legal advice; please don't just jump into something that may or may not help you with your debt issues. Many ways around debt, if not done correctly or payments aren't kept up with, may make things worse, not better, both now and in the future!

Several organisations in the UK offer free debt advice. Here are a few of the most reputable ones:

  1. StepChange Debt Charity: StepChange provides free debt advice and a range of debt solutions to help people struggling with debt. They offer advice over the phone or online and can help you create a budget and a debt management plan.

  2. National Debtline: National Debtline provides free, confidential advice on how to deal with debt problems. They offer advice over the phone, online, or by email and can help you understand your options for dealing with your debts.

  3. Citizens Advice: Citizens Advice is a network of independent charities that provides free, confidential advice on a range of issues, including debt. They offer face-to-face advice in their offices, as well as advice over the phone or online.

  4. The Money Helper Service: The Money Helper Service, Formally the Money Advice Service), is a government-funded organisation that provides free, impartial advice on money matters, including debt. They offer advice over the phone or online and can help you understand your options for dealing with your debts.

These reputable organisations can give you advice to deal with your debt problems. It's important to remember that they are there to help you, and there is no shame in seeking their help.

Al Baker, the author of this post, is the website content creator and financial blogger for The Penny Pincher.

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