Surviving the Emotional Side of Bankruptcy

By Chris Hammond, MS

The decision to file for either a business or personal bankruptcy is difficult enough. While you may have prepared yourself for the short-term and long-term financial consequences for the decision, most likely the emotional consequences have yet to be addressed. Each person is different and for some the emotional reactions are less than others but for the most part, each walks through the different stages although not necessarily in any particular order. By being aware of the emotional stages to the bankruptcy and learning to cope effectively you can begin to heal from the storm of bankruptcy.

Shock – Is this really happening? This is the most immediate reaction to the reality of filing for bankruptcy and usually lasts for a couple of weeks. It is similar to a deer caught in the headlights of an oncoming car; you feel paralyzed, overwhelmed, and insecure about the decision you made. Worse, some your past decisions are what contributed to this moment so you are reluctant to trust even yourself to make the simplest of decisions in the moment. Shock fades as the reality of your situation sets in and some minor decisions are able to be made.

Guilt – What have I done? Recalling past mistakes over and over for the point of learning from them is useful but when the recalling turns into beating yourself up, it becomes destructive. Feelings of guilt over poor decisions in the past seem to flood your thinking and can be too much to handle at times. Being aware of your mistakes and learning from them is different from agonizing over them. What is done is already done, now is not the time to beat yourself up over the past, rather begin to look forward to the new possibilities.

Shame – What will others think? Friends, family, co-workers, and neighbors might be able to find out about your bankruptcy. However, you are under no obligation to tell anyone about your bankruptcy unless it is asked for on an application to a job, rental agreement, loan or other legal binding document. Everyone does not need to know about your financial situation; this includes friends, relatives, co-workers, and neighbors and talking about it to everyone is not necessarily helpful. Your financial situation is your private business and should only be disclosed if required or agreed upon with your spouse. Instead find a confidant, a counselor, a long-term friend, or your spouse to discuss and vent your feelings of frustration, but try to keep the discussion to just one or two persons.

Anxiety – What will I do now? The pounding in your chest, difficulty breathing, racing heart rate, stomach indigestion, nausea, sweaty palms, dizzy feeling, chills or hot flashes are indications of intense anxiety. Anytime you feel out of control, overcome by fear of things that you were never afraid of before, or as if things are happening to someone else and not you, it is likely that you are experiencing anxiety. Just identifying anxiety as anxiety sometimes reduces the intensity while understanding that the root of the anxiety is the bankruptcy and not you losing your mind.

Anger – Whose fault is this? There is a tendency to blame others for the bankruptcy and in some cases this is entirely true. Economic factors such as loss of a job due to reorganization, loss of business, or decreased value in a home are for the most part outside of your control. Taking anger out on the economy, politicians, or your dog will not improve your condition, it will only make it worse because it distracts you from the things you can control. The same is true for blaming your spouse for the bankruptcy; all that accomplishes is to add to the increased tension in a marriage and could result in permanent separation.

Depression – Why does everything seem so hard? At some point all the other emotions seem to fade and you are overcome by an intense sadness that may result in a desire to be alone, crying over unexpected events, disinterest in things you previously enjoyed, moodiness, loss of energy, insomnia, indecisiveness, decreased sex drive, or sudden weight gain/loss. Situational depression under these circumstances is normal. There are times in our life when we will naturally have great peaks of excitement such as falling in love or the birth of a child followed by great valleys of sadness such as losing a loved one or as in this case filing for bankruptcy. Understanding the cause of your depression is half of the battle, not allowing it to take over your life is the other half.

The emotions you may experience after filing for bankruptcy may catch you off guard and can vary in intensity over a period of one to two years. In many ways, filing for bankruptcy is similar to a death because recovery from bankruptcy requires a commitment to die to past spending mistakes and expectations for the future. Look for the article titled, “Now What: Recovering from the Negative Emotions of Bankruptcy”.


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About the author- Chris Hammond is a Registered Mental Health Counselor Intern at LifeWorks Group w/ over 15 years of experience as a counselor, mentor & teacher for children, teenagers & adults.

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