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Just one year after the never-forgotten 9/11, I had the most humbling experience of my life.
The walk down the cold musty hallway was lonely. People walked passed me donning their bathig suits, headed toward the pool as I headed toward the excruciating reality that I had failed and failed big. I stood before a bankruptcy judge the list of the debts I could not pay were read aloud in a small conference room of a local hotel. I stated under oath that I could not pay them back even though I had promised to do so. I wasn't sure if I'd ever recover. Such a disastrous
In a small and sparsely decorated hotel conference room, I stood before a bankruptcy judge the list of the debts I could not pay were read aloud. I stated, under oath, that I could not pay them back even though I had promised to do so. I wasn't sure if I'd ever recover. Such a disastrous mark on my credit report and feeling lower than dirt, I knew I never wanted it to happen again.
More than a decade later I can tell you I have recovered, spiritually and financially, and we have the tools to hopefully keep it from happening again.
Why hopefully? Because in the blink of an eye, things can change. Sometimes no matter how prepared we are for something the worst does happen. But I am certainly wiser and more mature financially then I was 12 years ago. The question at hand, though, what does recovering from bankruptcy look like? Can it be done?
Recovering from Bankruptcy
You need to understand the implications of bankruptcy on your creditworthiness. When you file bankruptcy you are negatively affecting your FICO score for at least 7 years. If you filed Chapter 13 Bankruptcy then you've committed to repaying at least a portion of your debts but if you filed Chapter 7 Bankruptcy you'll expect to find the bankruptcy information on your credit report for at least 10 years. This means it is very unlikely you'll get issued any new credit and if you do it will come with fees, high interest or maybe both.
How do you recover from bankruptcy when you can't get credit?
Recovering from bankruptcy is not going to be a short process and it is actually less to do with your credit score than you might think. You cannot remove the bankruptcy note from your credit report, but you can take steps to start improving your overall financial fitness. Consider this a starting point for a successful financial future without dependence on credit to meet your everyday living expenses.
Step 1: Forgive Yourself or Your Family
If there's one step that is often overlooked when Christians are recovering from bankruptcy it is forgiveness of self. Even when there is nothing to have been done differently you must be sure you have not taken on guilt that isn't rightly placed. You did not cause the car accident, you did not know your child or spouse would get sick, you did not close the doors at your plant. Yet many times we take on self-guilt thinking we could have done better. The truth is, sometimes there is nothing you could have done to prevent the situation so do not accept the devil's condemnation.
Even if bankruptcy was at your hand (or your spouse's) due to poor financial management, you must forgive yourself or them, or both. The Bible never once mentions “forgiving yourself” however, if we are free in Christ and our sins have been forgiven by Him, we must not wallow in self-hate, self-pity, or self-condemnation. Release yourself from that now, in Jesus' Name!
Step 2: Understand What Triggered Your Bankruptcy
We won't always know the root cause of every unfortunate event that happens to us or the ones we love. But when we have reached a place of financial despair it's important to understand the root cause. This root may not even be yours. Unexpected medical bills, employer closing their doors, mass layoffs; these things are not something that could have been controlled by you. On the other hand, I speak to many clients who have compulsive shopping habits, non-existant budgeting skills or a general lackadaisical attitude abut handling money which lead them to bankruptcy.
This root may not even be yours. Unexpected medical bills, employer closing their doors, mass layoffs; these things are not something that could have been controlled by you.
On the other hand, I speak to many clients who have compulsive shopping habits, non-existant budgeting skills or a general lackadaisical attitude abut handling money which led them to bankruptcy. I was in this category. I had zero budgeting skills and didn't strive to learn any until it was too late. I was not equipped to handle credit cards and yet I freely used them.
Step 3: Repent of Past Financial Mistakes
Spiritually, starting over is possible because Christ is our redeemer but we need to acknowledge and repent of the careless activities that led us to financial ruin.
Romans 13: 7 (EST) says, “Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed.”
As with any area of life, we must recognize our role in falling short and give that over to God. We need to repent of our sins and the sins of past generations that could be hindering our financial stability. Yes, generational sins can play a part in our finances. You'll find a prayer below that is useful in repenting from past financial mistakes.
Step 4: Learn to Handle Your Money Properly
If you've had to file bankruptcy due to poor financial choices (overspending, lack of budgeting, etc) than there are proactive steps you can take to learn how to properly handle your finances even when you cannot get new credit. Learning how to handle money God's way will help you:
- Reduce stress over finances
- Position yourself to avoid the same mistakes
- Learn to live within your means
- Be a good steward of the resources God has given you
- Be less dependent on debt, even for large purchases
As a budgeting coach, I often talk to folks who have come out of bankruptcy and “never want to go there again.” The best way to avoid bankruptcy from your own doing is learn to live within your means, understand biblical stewardship and have a customized budget for your life. If your bankruptcy was due to a major catastrophe or illness you can still recover and gain great insight by evaluating how you are handling your finances.
Bottom line, a bankruptcy does not have to define you.
A Prayer of Repentance When Recovering from Bankruptcy
Here's prayer of repentance you can pray when you're ready. This is a serious step and one that should not simply be checked off and forgotten about. Our words have power. When we speak out the Word of God and stand in agreement with it, we are harnessing the power of Hebrews 4:12.
I repent of mishandling my finances. I repent of ignorance and foolishness with regard to being a good steward of the finances you have entrusted me with. Forgive me for walking away from my debts and not repaying those who were owed. I repent for my generational line and myself for treasuring money more than You. I repent for my generational line and myself for chasing after things instead of chasing after you. I repent of harboring unforgiveness for myself or those who had an impact on my finances.
I declare that I will be satisfied. I declare that I will have enough. I declare that I will not worry about where my clothing or food will come from. I declare that my mind is open to learning from You the ways of being a good financial steward. I declare that I have a sound mind to handle my finances guided by Holy Spirit. Your word says that You go before us and make straight the crooked paths. I will walk the narrow and straight road. I tear down idols of status and wealth and I replace them with You.
In Jesus' Name,
For a more in-depth prayer, consider reading this prayer for financial freedom from Paul Cox.