“What’s really cool is that you can keep updated with your trustee payments online,” the intake specialist at my new bankruptcy attorney’s office told me.
I nodded, not sure how else to respond. After finally deciding to file for bankruptcy, everything had happened so quickly. Two weeks earlier, I’d Googled “bankruptcy attorneys near me,” clicked on the result that popped up with the most positive reviews and made an appointment to meet with an attorney.
After an initial phone interview to set up my “new client appointment,” I brought all of my financial documents ― including my current credit card, student loan and bank statements, along with any additional financial information ― to my lawyer’s office. Once there, I suddenly realized this firm was handling dozens ― even hundreds ― of cases just like mine and to everyone working there, going bankrupt seemed not only routine, but almost boring.
The intake specialist asked me question after question about the value of my belongings in order to build my “asset profile,” so the court could review whether I needed to surrender these things to repay some of my debt. I was assured that the likelihood of that happening was almost impossible because I didn’t have major assets like property, but it was scary nonetheless. To me, choosing to file for bankruptcy was one of the most painful decisions I’ve ever made.
I was 26 years old, four years out of college and eight years in debt. I got my first credit card, which had a limit of $5,000, when I was 18. I worked at a movie theater close to full time, making $9 an hour as an associate manager supervising a staff of up to 20 employees. I was also enrolled full time in college. I’d started my higher education at a community college to try to save some money, and when I got into a four-year university, I had to take out loans for just about everything ― tuition, textbooks, rent, food and gas.
When my work hours were cut because the massive theater chain I was employed by didn’t want to offer benefits like health insurance to non-salaried employees, my income dropped by nearly 25 percent. So, when that silver credit card arrived in my mailbox with my pre-approval status stamped right on the envelope, I was thrilled.
No interest for 12 months? I saw it as a temporary but much-needed lifeline and opened the account as soon as possible.
That move was the beginning of a spiral that took hold in my college years and continued through my early and mid-20s. I maxed out that first card after just two years and then opened a second one, which had instantly approved me for a $2,000 line of credit.
When I graduated from college, I had nearly $38,000 in student loan debt, which seemed astronomically high to me but, in reality, wasn’t much higher than the average student loan debt of $32,731. On top of that, my credit card debt weighed in at roughly $12,000 across four cards, all with varying interest rates. The average American has 2.6 credit cards, according to Gallup, and an estimated monthly revolving credit card balance of $6,929, according to NerdWallet.
After graduating from college, I got a job working as a writer at a marketing agency and I really thought my $30,000 before taxes salary would help me dig myself out of my $50,000 mountain of debt. However, I soon discovered what so many others have learned: It’s really hard.
“At 26, I was financially worse off than when I was 22, and leaps and bounds worse off than when I graduated high school. My student loans were accruing interest and I was barely keeping my head above water with my credit cards..."”
I was able to afford the minimum payments on my credit cards, but I was barely scraping by with my other expenses. Even though I was paying what I owed on time every month, thanks to the interest rates on my cards, I realized I wasn’t make much of a dent in wiping out my overall debt. I deferred my student loan repayments as soon as I could and repeated the process for the maximum of three years that I was able to do so.
I moved a couple of times because of job opportunities that arose for myself or my girlfriend, and each time we’d spend most or all of our savings to help with the moves and would end up tacking some new expenses on my credit card debt too.
At 26, I was financially worse off than when I was 22, and leaps and bounds worse off than when I graduated high school. My student loans were accruing interest, I was barely keeping my head above water with my credit cards, and I’d had to buy a car along the way, which added another $15,000 to my total debt.
My monthly income at the time was about $2,000 after taxes, and my budget typically broke down like this each month:
$500 rent + $100 utilities + $280 car payment + $80 cellphone +
$82 car insurance + $100 groceries + $150 gas +
$600 credit card payments = $1,892 in total monthly expenses
That left me with just over $100 a month as a “buffer.” But what I found was that there was inevitably always something that would push me into the red zone. I’d need an oil change and a haircut, or I’d need to go to the doctor, or I’d have to buy Christmas presents for my family.
I’m not going to pretend I lived like a monk the whole time either. I admit, I wasn’t always spending my money as wisely as I should. In fact, there were times when I felt so defeated about money and the state of my debt that I honestly just said, “Fuck it” and spent money I didn’t have on things I shouldn’t have spent it on.
But for the most part, I was careful and I was trying to do whatever I could to both make more money and pay off my debt. I even supplemented my income with occasional freelance writing jobs whenever I was lucky enough to get one.
But nothing seemed to help. I started to panic as I checked my bank account and credit card balances every day. Will I ever be able to really get myself out of this? I thought. I have no savings, no retirement fund, and I’m one big catastrophe away from having nothing.
At the same time, I realized that as bad as things felt for me, there were many people who had it much worse, and I recognized my privilege of being a white guy from a middle-class American family. My parents made good money and I grew up in a pretty wealthy area. My girlfriend’s father is a surgeon and they are, by anyone’s standards, very well off. There were many times when I called my parents, embarrassed, and asked them if they could spot me money for gas or to pay my car insurance bill that month. Our parents even helped us out by supplementing part of our rent for a few months when things were really tight. I was never at risk of becoming homeless because of my debt or my inability to pay, and unlike so many people in this country, I always had someone to rely on in especially difficult moments.
I can’t even imagine how much more difficult and overwhelming it would be to not know that support is there. Even with all of my societal and financial advantages, I was still barely living paycheck to paycheck with no room for error and I felt like I couldn’t hang on for much longer.
I finally began to consider filing for bankruptcy to try to dig myself out of this situation. I researched the process online, including what my options were and what the consequences would be if I decided to go through with it. I wanted to know how it would change my life, and if it was really worth it. That’s how I ended up at my new bankruptcy attorney’s office.
“I was never at risk of becoming homeless because of my debt or my inability to pay, and unlike so many people in this country, I always had someone to rely on in especially difficult moments. ... Even with all of my societal and financial advantages, I was still barely living paycheck to paycheck with no room for error and I felt like I couldn’t hang on for much longer.”
Once there, I learned that a Chapter 7 bankruptcy, if approved, could wipe out my debt in full but would require surrendering assets like cash or property and would require paying my lawyer in either a lump sum or over several weeks. A Chapter 13 bankruptcy allows individuals to keep some assets and instead of all debt being erased, some would be discharged and the rest would be settled through a monthly repayment plan over three to five years. Also, if I chose the Chapter 13 route, my lawyer’s fee would be processed as part of that monthly payment. It wasn’t until doing research for this essay that I realized this “no up-front costs” policy is a common practice for bankruptcy attorneys in the South, where I was filing. It helps low-income debtors afford to go through the bankruptcy process, but the lawyers tend to charge much higher fees, and many people can’t keep up with the three- to five-year repayment plan, which can result in their cases being dismissed and the debts remaining.
At the time I had just $49 in my checking account and nothing in savings. I sat across from the attorney and thought about what to do for less time than I probably should have, considering the weight of the decision. All I knew was I didn’t have the money to pay for Chapter 7 and I really only had one choice.
“I’ll do Chapter 13 then.”
I was then told not to contact any of my creditors and to make no payments to them between that first meeting and my court date. The law firm would file all necessary paperwork, my creditors would be notified of my decision to file for bankruptcy, and by law they weren’t allowed to contact me about my debts after that.
As far as my student loans were concerned, those were not dischargeable in bankruptcy, though my lawyer told me this isn’t always the case. However, he reiterated that trying to get student loans discharged in bankruptcy is extremely difficult to do and almost always fails. It was explained that during my repayment period, I wouldn’t have to make any student loan payments. The only payment I’d be making would be my monthly repayment to my bankruptcy trustee for my other debt over the next three to five years.
I shook hands with the attorney at the end of that meeting and made plans to send my first payment to the trustee before my hearing ― a requirement of the process.
My new client appointment took about 45 minutes from when I walked in the door, meeting with the intake specialist and then the attorney. I went home that night and told my girlfriend that for the first time in years, I finally felt some relief.
I had no idea what to expect when I got to the federal courthouse for my bankruptcy hearing a couple of months later, but it was nothing like any of the scenarios that had been running through my head.
I made my way to the room where I was told to meet my attorney, and it was so crowded that there wasn’t a single empty seat available. A representative from my law firm had a sign-in sheet and a branded duffel bag full of folders with my name written on them. After signing in, I was handed a sheet of paper and my folder was set onto a stack. The rep told me to head into the courtroom when my hearing time was called, which happened less than a minute later.
When I got into the room, I was surprised to see that it was essentially just a large conference room and nothing like the courtrooms you see on TV or in the movies. There were about 50 chairs ― half of them full ― and everyone else with a 9:45 a.m. appointment piled in and waited.
Seated at a table at the front of the room was a representative from my trustee’s office, who would be overseeing my case. The other person sitting at the table was a judge or some kind of court officer, but to be honest, everything was happening so quickly and so casually, I’m still not sure who was who or what was what.
“Admitting you’re in debt, much less deep debt, is incredibly embarrassing and makes you feel like a failure. However, it’s something that so many people are faced with, and going through the bankruptcy process can actually be a blessing.”
A lawyer from my law firm whom I’d never met or spoken to before was called to the front of the room to represent everyone filing from their firm that day. It seemed like the court proceedings were set up to save as much time and energy as possible for everyone present. The firm with the most new bankruptcy filers went first. After only 10 minutes I was called to the front of the room.
My file was reviewed for literally just a few seconds. Then I answered a couple of questions and verified that I’d been truthful about my finances when I filed for my bankruptcy. After that, I was told, “Your case is approved. You are dismissed.” I thanked the court and left the room.
And just like that, I was officially bankrupt. It was so sudden that I figured there must be more I needed to do, but the rep from my law firm smiled at me and said, “You’re all set. Have a good one.”
I’ve been in bankruptcy ― which simply means I’m making monthly payments on my debt through the prescribed plan laid out by the court ― for almost a year. My credit dropped a lot very soon after filing. My lease was up just a month after I filed, and my girlfriend and I were instantly rejected by an apartment complex because of my low credit score and the fresh wound on my credit report. Thankfully, because of our privileged circumstances, my girlfriend’s dad agreed to cosign our lease, and as quickly as we were rejected, we were approved. But if we didn’t have that particular parachute to pull, I’m not sure where we would’ve gone when our lease was up.
Until now, I’ve told only a handful of people about going bankrupt. I suspect that, for the many thousands of Americans who file for bankruptcy each year, that taboo feeling is probably similar. Admitting you’re in debt, much less deep debt, is incredibly embarrassing and makes you feel like a failure. However, it’s something that so many people are faced with, and going through the bankruptcy process can actually be a blessing.
Thanks to my Chapter 13 plan, every month I now pay half as much on my debts as I was paying before. In fact, now, for the first time in my adult life, I’m actually able to save a little money each month.
Yes, I will be repaying my debts through my bankruptcy for the next four years. Yes, I’m worried about the next time we have to move, or what will happen if my car breaks down or if I were to face some kind of expensive medical emergency. But I’m thankful to have found a solution to a problem I’m positive would only have grown larger if I hadn’t made the painful and necessary decision to go bankrupt when I did.
I have to constantly remind myself that my bankruptcy is not a sign of failure; it’s an accomplishment. Going through the process allowed me to gain control over my financial situation, and in turn my life, and for the first time in years, I’m hopeful about the future and there’s nothing shameful about that. It took me a long time to get here, but I can honestly and finally say I filed for Chapter 13 bankruptcy and I’m proud of it.
John-Michael Jalonen is a writer, actor and public speaking coach living in Richmond, Virginia. His work has been published in Richmond Magazine, the Richmond Times-Dispatch, and The Health Journal. Find him on Twitter and Instagram @john_mike_.