Bankruptcy doesn’t happen to good people, but to conmen and profligates. This stereotype is, of course, nonsense. It could happen to any one of us. It happened to me.
Recent statistics indicate that personal bankruptcies have soared to record-breaking levels. Unsecured credit is easily obtained and we are easily persuaded to spend it.
It was spending on credit cards that led to my downfall. I was a jobbing writer and, like most freelances, I juggled my finances. I would swap credit from card to card to benefit from periods of zero-rated interest. Large amounts of money would instantly clear the debt, only for another slow period of work to push me back into the red. It became normal for me to live on the bogus largesse of my credit cards.
This situation lurched along nicely enough for years. But gradually, I found myself permanently living on credit and never quite bouncing back into the black. I wasn’t squandering money on some high-octane media lifestyle; my credit card paid for life’s essentials: groceries, travel passes and the occasional bottle of wine.
The slide into the permafrost of debt was abetted by an ever-expanding credit limit. Having an extra £2,000 mysteriously made available to me on a plastic pal was too tempting. I gambled on finding a job in the following few weeks that would help to pay it off. But as my overdraft ballooned, and my credit dried up, I found it impossible to concentrate on work. The lead-up to my bankruptcy wasn ‘t dramatic, but a turgid decline.
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Eventually, I got in touch with the Consumer Credit Counselling Service (CCCS), a charitable organisation for people with financial problems. I spoke to a sympathetic, practical counsellor, but it soon became clear that I’d slipped past a recoverable situation. My choices were limited: hope that all those to whom I owed money would accept a paltry payment each month on frozen accounts, wait to be declared bankrupt, or petition for my own bankruptcy.
I made one of the most difficult decisions of my life: I chose to declare myself bankrupt rather than have someone else do it for me.
The Royal Courts of Justice is not my usual stamping ground. In the bankruptcy court I looked around at the other people gathered there, and saw nothing out of the ordinary. There were no shared features to mark us out as insolvent, no common peculiarity to say “penniless and broke”. After declaring the names of my creditors and the amounts that they were owed, I handed over a form to a woman behind a glass screen. She told me to return after lunch. By passing over that innocuous-looking document I had triggered a course of action that was impossible to stop.
Our group reconvened after lunch. A man sat at a table with a sheaf of papers. He read out my name and gave me a letter — status: bankrupt. Two simple words changed everything. I was instructed to make my way to the Official Receivers Office in Bloomsbury.
There, a sympathetic woman picked over my financial misfortune. Her professional, caring manner caught me out and it was then that months of worry, insomnia and the reality of what had happened hit me. I broke down and sobbed. I’d lost my dignity, but strangely bankruptcy came as a huge relief. I had been freed.
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The ramifications of bankruptcy are not to be taken lightly. Apart from having a devastated credit rating that will take years to recover (if it ever does), bankrupts carry a stigma. And even though the burden of bankruptcy has been alleviated in recent years to help people to get back on their feet — I was fortunate in being discharged after just eight months — I still keep it a secret from my colleagues (I write this under a nom de plume).
I’m back at work now. I have a basic bank account with no credit facility — not that I’d want one — and, of course, no credit cards. My financial situation is still strained, although nowhere near as bad as it once was. At least I can breathe again and get on with life; the suffocating load of debt has gone, but at a price.
Don’t get too chummy with your flexible friend.
Consumer Credit Counselling Service: Freephone 0800 1381111 www.cccs.co.uk