"Bankruptcy and Substance Abuse"

In 1999, I found myself in the unfortunate position of needing to declare bankruptcy. My husband had developed a substance abuse problem and was spending all of our money.

I had had to take out cash advances on our credit cards to put food on the table, pay the mortgage, etc. We had $73,000 in credit card debt. I had gone through all of my 401K money paying bills.

We each needed a car for work. After spending almost $7,000 on car repairs during the previous year, one day neither of our cars was working, we had no more money, no more 401K money, and a mortgage payment due, credit card payments due, etc.

A co-worker who I wasn't even friendly with, but who had overheard my finance- elated phone calls at work came up to me the day we had no cars and told me, "You need to declare bankruptcy."

I looked at him like he was a martian. I knew nothing about bankruptcy except that it was bad, bad, bad. But he was kind enough to share his own story with me. I went home and called a bankruptcy attorney. I described our situation and he was very matter of fact and explained what I needed to do to declare bankruptcy.

Talking with these two men made me see that filing bankruptcy was the only rational path to follow. We both worked, could not pay our bills, and had no more financial reserves. Once I realized that, it was very simple to continue with the process, which started in June and was finalized with the bankruptcy judge in October.

In addition to being able to make a fresh start, I had some things on my side:

First, I had student loans. These cannot be discharged in a bankruptcy proceeding as they are government-insured and then the government would need to pay the loans. The good thing about retaining my student loan obligations was that I had an immediate opportunity to rebuild my credit rating by paying them on time.

Second, we didn't have a lot of equity in our home, so we didn't have to sell it. The court allowed homeowners to keep their home if they had $10,000 or less equity after deducting 8 percent of the selling price (that the court estimated it would cost to sell it). The legal basis for allowing one to keep one's home is that the benefit to the creditors (of less than $10,000) was not as great as the detriment to society of having a family be dislocated by forcing them to move.

Third, my husband and I divorced due to his continuing problems, and I was also able to make the mortgage payments, so this also improved my credit rating immediately.

I also went to a free seminar on recovering mentally, emotionally, and financially from bankruptcy. I learned that whatever mistakes were made in the past would only be compounded by being stuck in the past. The point of bankruptcy proceedings is to give the person the opportunity to start with a clean slate.

Those who work with bankruptcies understand this and are not in the business of punishing those who need to declare bankruptcy, so don't punish yourself.

Those who don't understand - well, they don't understand, and that's OK. I have two graduate degrees, and I have to say that that free seminar was one of the most educational and beneficial events in my adult life.

Contributed by Kathleen from New York