Bankruptcy hits self-esteem

I teach money management classes for people going through bankruptcy. Nationally, the majority of bankruptcies are related to medical bills, divorce, widowhood or unemployment. My clients are no different. People of all ages and different walks of life have attended my classes.

There have been teachers with master's degrees, restaurant owners, and a bank manger who said he has "seen the dark side of the banking industry."

Some of the saddest cases are retired couples who co-signed loans for their adult children and got stuck with the debt when their children could no longer make the payments.

A disabled Gulf War veteran has short-term memory loss and can't hold down a job any longer. Some couples work two minimum wage jobs each to pay the bills. While bankruptcy may bring relief from the bills that are stacking up, it may be a short-term solution. Unless their income increases, there's a good chance they will be drowning in debt once more in a few years.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires that those filing for personal bankruptcy learn how to manage their money. How they got to the point of bankruptcy is a road often filled with desperation, depression and for most shame: "At my age I should known better" is a common self-deprecating remark.

Some of my clients tried to hang on as long as they could by supplementing their monthly living expenses by using credit cards, hoping their situation was short-term and their financial situation would improve before the next month's bills started to pile up. Instead they found themselves deeper in debt.

My students have been hit in more ways than just financially. Some are suffering deep depression and loss of self-esteem. A student told another how his deep faith gave him a reason to live for when he had thoughts of suicide.

Bankruptcy is not a perfect solution. The bankruptcy will remain on a credit report for 10 years. Prospective lenders usually charge them higher interest rates since they are now considered a higher risk. It will take years to rebuild good credit, but it is possible.

The general advice has been to live within your means. Go one step further and live below your means. Save, invest or donate what you don't spend. Your life will be richer for it. Jack Zavada retired at the age of 51 by living below his means. His 10 smartest ways to live beneath your means make sense and won't hurt your standard of living.