Surviving the Emotional Effects of Bankruptcy

Filing bankruptcy can stir up many stressful or negative emotions. Your sense of self, security, and worth are often closely tied to financial circumstances. Loss of money can feel like a personal loss of identity, self-esteem, and confidence. A real or perceived loss of interpersonal power can happen before or after you file bankruptcy.

Recommendations for Bankruptcy Thought Process

It can help to disentangle the practical realities of money from the possibly destructive or limiting emotional responses to a bankruptcy filing.

To come to terms and deal constructively with the situation, you can:

  • Focus on practical realities. Things are what they are just for right now. As you get finances under control, a greater general sense of control will follow.
  • Learn from this experience and take steps to ensure future financial security. This can help ease your current worry.
  • Learn new skills to protect your financial well-being in uncertain economic times. Credit counseling services can be helpful for your financial future.
  • Pass some of the responsibility to a professional. A bankruptcy attorney can help take some of the tasks off your plate.
  • Experience the feelings of loss, depression, anger, sadness, and shame, and in time be able to let go of those feelings and move on.
  • Let go of resentment and blame. Consumers and businesses can face overwhelming debt even after doing "all the right things."
  • Exercise self-compassion. Although filing for bankruptcy feels like life is over, it really can be a fresh start in many respects.

Adjusting to a New Reality After Filing Bankruptcy

Filing for bankruptcy will lead to significant changes in the future. Chapter 7 bankruptcy requires selling off some of your assets to raise enough money to pay off debts. This can leave someone with significantly reduced wealth and fewer possessions after all is said and done. You can prepare your mindset ahead of time to live a less "materially wealthy" life.

The same financial problems that lead to bankruptcy may also lead to divorce, separation, or other family changes. Significant business and professional changes might be in the offing as well.

Bankruptcy may also cause someone's mental health or social relationships to change. People may not be able to afford the vacations, outings, activities, and lifestyles that they were previously accustomed to enjoying.

Consider seeking help in all of these areas — legal help and mental health support.

Viewing Bankruptcy as a Fresh Start

At all times of loss, people tend to feel that their entire foundation has been shaken. Your most fundamental sense of security might feel disrupted.

You may question your trust in yourself, in others, in business partners, and in the world at large. It may be natural for many to bury these negative feelings and frightening emotions. However, bringing these core insecurities to a conscious level can actually reduce the fear and the sense of being out of control.

Such significant life changes can bring individuals to address their situation constructively. Seek professional help, rely on loved ones, and remember you have financial and legal professionals ready to help you through the bankruptcy journey. You do not need to go it alone.

Finding Emotional Support Services

If you or someone you know are facing health or mental health concerns due to bankruptcy, there are options:

  • The Substance Abuse and Mental Health Services Administration (SAMHSA) can help you find mental health services in your area
  • United Way is a national organization that provides a community resource line and 24/7 crisis counselors
  • You can search for The Office of Mental Health Services in your state
  • Many companies offer employee mental health services, referrals, and other helpful options
  • Veterans and their families can contact the U.S. Department of Veterans Affairs for various health services
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