I'm a Debt Counselor ... and I Filed for Bankruptcy

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I'm a Debt Counselor ... and I Filed for Bankruptcy
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By Dave Landry

In our Money Mic series, we hand over the podium to people with controversial views about money. These are their views, not ours, but we welcome your responses.

Today, a debt counselor and financial adviser shares how, while solving his clients' financial problems, he mismanaged his own money to the point of bankruptcy.


There are certain times in your life you remember in stark detail. Your first kiss. The first time your heart was broken. Where you were on 9/11.

One of those days for me was the day I had to tell my wife that we needed to file for bankruptcy. That we would have to give up our three-bedroom home. That we had to break our lease with Infiniti. It wasn't the actual moment when I filed for bankruptcy -- that was just a jumble of papers, numbers and black-and-white print -- that left an indelible imprint on my brain.

No, it was the expression on my wife's face when I broke the news. Shock, disbelief, anger, panic all flitted across her face, before she paused, gave a little laugh, and said, "Dave. That's not funny. There's no way you would need to file for bankruptcy."

Sadly, she was very, very wrong.

She completely trusted me with our financial dealings, as I, a professional debt counselor, was the "expert." Surely, who would be better qualified to handle the family finances, than the resident finance manager, who has seen so many people on the brink of financial ruin and helped them back onto their feet?

And I was good at my job too. I knew the many pitfalls of taking on too much debt, spending beyond your means, becoming overwhelmed with interest, losing jobs.

It's easier, however, to see other people's shortcomings and how to fix their issues. I was blind to -- or at least myopic about -- our struggles in a way that I'm sure another financial adviser would have spotted immediately.

What Went Wrong

Jennifer and I got married young, right out of college, both of us with student loans -- to the tune of $40,000 altogether. Because we were young, we made poor decisions in the beginning, opting to pay for most things with credit.

It didn't matter if we didn't have steady jobs, or had incomes that supported our lifestyles -- at the time, my wife worked at a local restaurant as a server making roughly $11.50 an hour plus tips. We needed new furniture, as we were just starting out, and we didn't want the regular IKEA stuff, so we wound up buying an overabundance of expensive furniture, calling it an "investment." If we got tired of one car, we'd quickly go out and get another. Trips to New York, Hawaii and Europe were a part of our lifestyle.

Growing up, money and frugality were never topics that were widely discussed in my family. I think that lack of clarity may have had a slight influence on my career choice, to pursue something unknown. I also think it led to my eventual financial downfall, as I never grew up saving money -- I only learned how to teach others.

In two years or so, we had amassed at least $20,000 in credit card debt to go with our solid $40,000 of student loans and thousands in car loans.
In the meantime, I had been slowly making deals with bigger and more renowned clients and taking on more responsibility as a freelance financial adviser.

Then Jennifer got pregnant, which put a halt to our jet-setting ways.

But now we need a house for our growing family, so we bought a smallish two-bedroom house outside of Los Angeles. We didn't think we would need to upgrade immediately, but shortly after Sara was born, Jessica was pregnant again, with Zoe. We thought we needed a bigger house at the time, but in retrospect, perhaps we could have done without. This was right after the economic downturn of 2008, so we sold our house at a massive loss -- around $100,000, and turned right around and secured a mortgage for a three-bedroom house in a good school district in Pasadena, Calif.

It's obvious to me now that we were doing everything wrong, that I was doing exactly the opposite of what I counseled my clients. Instead of paying down as much as possible on existing debts, I was paying just the minimum and going out and accruing more debt. Rather than immediately putting income into savings or retirement accounts, I was spending every last bit of my income to keep us in our lifestyle.

How did I not see that we were headed for financial disaster? Part of it was that I never adjusted to the mentality that we wouldn't always have two incomes. With my mind so focused on other people's finances, it was easy to wind up neglecting my own. After the birth of the girls, Jessica decided to stay home full-time (which I fully supported -- the girls needed their mother to take care of them and not anyone else). We went from a dual-income family with no children to a single-income family with two children in what seemed like a blink of an eye, with two more mouths to feed and care for on top of our existing expenses.

Part of it was hubris as well. I was doing well in my practice and had amassed a sizable client base, which I thought would bring in more income than it did. I hadn't fallen behind on any payments (at first), and yes, I thought that nothing bad could happen to me because I knew better; I was financially invincible. I thought I knew how to save myself before things got too bad.

My Breaking Point

Three years passed and we were still scraping by. I was hiding the late payment notices from my wife so she wouldn't panic, and started making excuses for why we couldn't take that vacation to New York this month.

Finally, one night, after shredding another pile of delinquent notices, I sat down and took a hard look at my finances. I felt it was finally time to do for my family what I had done for so many others. I treated myself as though I was a client, something I had refused to do for so long out of sheer ego ... and what I found shocked me.

My habit of paying just the minimum on our debts while living beyond our means had left us with almost no savings (unless you count the paltry $2,000 in a savings account that wouldn't even pay for a month's mortgage).
Our interest rates on the credit cards were through the roof due to several delinquent payments. We were at least three months behind on mortgage payments, and the bank was starting to threaten foreclosure. We had barely made a dent in paying back our student loans.

I kept looking for a way, a plan, some solution that would allow us to keep our house while paying down our debts, but it was too late for most programs. Credit card companies would be unwilling to work with me because we were so far behind on payments that some were in collections. I didn't want to file for bankruptcy, knowing full well that only some of that debt would be ameliorated (student loans, for example, would not), but after spending most of the night wading through calculations, it became abundantly clear that I didn't have many other options.

I filed in 2011, after struggling for nearly a year to keep afloat.

Life After Bankruptcy

Instead of the cozy three-bedroom home where my daughters lived all their lives, we suddenly found ourselves crammed into a one-bedroom, one-bath apartment on the edge of downtown L.A. with two almost-teenagers, far from the city-suburbs of Pasadena where all our friends lived.

What was worse -- much worse than losing our meager savings, our home, our car and much of our belongings -- was losing the respect and trust of my wife, and my confidence in myself.

Not only was I not able to support my family, but I had made things worse for them. My daughters now shared a corner of the living room, converted into a bedroom using screens, instead of having their own rooms. Jess barely spoke to me for weeks after I broke the news. Sometimes I think the only reason we didn't end up divorced was because we simply couldn't afford it.

My wife and I had to figure out how to go to work and shuttle the girls to and from school and to play dates and birthday parties, with just one car (it was a blessing our old Toyota was paid off).

I spent so much time resurrecting my own finances that I barely had a chance to maintain my business, so now I'm building it back up. My wife is working again in the service industry, and we discuss our financial situation openly, which puts us in a much stronger place than we used to be, both financially and on a personal level.

We've learned to cut out unnecessary expenses. Any vacations we take are day trips to somewhere local. We always pack our own lunches. Cable was quickly deemed an extravagance and cut out of the budget. Our old car may be old, but it still runs with a minimum of upkeep. My wife shops at secondhand stores for clothing and other necessities. We coupon clip now -- I've become quite the pro. We've paid down roughly two thirds of our amassed debt, a number that dwindles by the day.

We also set up a budget for ourselves, detailing how we are going to pay down our remaining debt, while saving for a rainy day and retirement.

The one-bedroom is a tight fit, but we're going to hang in there a bit longer until we have more savings banked. I realize that getting a mortgage is going to be much tougher now, so I'll need to rebuild my credit and save up plenty of cash for the next go-round as a homeowner.

I never thought I was a particularly judgmental person -- people from all walks of life came through my door needing assistance, and I was always able to help them out. But I never really understood just how humiliating, stressful and demoralizing it is to find yourself in over your head in debt until I had to bail myself out.

Yes, some clients turn away from me because of my history; but just as many are happy to take on a debt counselor who has filed for bankruptcy. They think that I understand better than anyone else what they're going through and how to find the right solution for them, as they can see that I'm on my path to recovery.

Would I ever want to go through this again? Absolutely not. I wouldn't wish it on my worst enemy. However, I am lucky to walk away relatively unscathed; I'm poorer but much wiser. And I still have my family, which is the most important thing of all.

Dave Landry Jr. is a personal finance adviser and former accounts manager for several large companies. He enjoys blogging and creating infographics in his spare time, and frequently works with DepositAccounts.com to assist people in opening the savings, checking or CD account that is right for them.


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25 Comments

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vlady1000

I guess common sense is not all that common.

January 29 2014 at 5:35 PM Report abuse rate up rate down Reply
progressivehoax

Headline should read, I'm a debt counselor, I filed for bankruptcy and I'm a fool.

January 28 2014 at 10:48 AM Report abuse -1 rate up rate down Reply
SPQR

unless he can pull out of that mess his wife will dfivorce him. Of course if he hadn't spent all that money she would have divorced him for that. This is America and most of us feel that we are entitled. However, those days are going away quickly if not gone. The money people took trillions from us and the government is getting the rest of it. FEMA camps should go public! A great investment for the future.

January 28 2014 at 9:21 AM Report abuse rate up rate down Reply
metalangel1

One more thing, in my family and my husband's family, just about every mother worked. I find it weird that some men want their women to sit home and watch kids all day long. A good role model would be a women who can take care of kids and handle a job simultaneously. I realize when the kids are very small (from newborn to 3), it would be a great idea, if you are financially stable, to have your wife stay home. But kids do get bigger, and then mom should be able to work. My mother worked, my grandmother worked, my mother-in-law worked and my husband's grand mother, who raised 5 kids worked. What's the excuse these days with women who want to sit home and watch kids? I just don't understand it. I work from home. You can be a mother and work from home these days. No excuses! If you had a home, why didn't you take in roommates? I took in roommates for 15+ years! I worked, too. I even work from home now. I have no excuses! If you want kids, plan on working, even if it's just from home if you can't pay all the bills! If you don't have a very large savings account available, as a woman, you need to work, even if you're a mom! You can also take in roommates then if you have a house. I had roommates for 15+ years. That means I had no mortgage to pay for 15+ years and now my home is just about paid off. I worked when I took in roommates as well, and I'm a woman. One very good lesson I learned in life is that you have to pick up your rear end and work. You can't expect everyone to do everything for you. Hard work brings prosperity. My mother worked and I turned out fine. My husband's mother worked as well with two small children to raise all by herself. We both turned out just fine.

January 28 2014 at 8:26 AM Report abuse rate up rate down Reply
metalangel1

I'm really sorry to hear about all of this. I would have taken in roommates and put everyone else in the living room and/or garage to save my house. I would have just declared bankruptcy on everything else. In the state of Florida, your house is sacred and creditors won't come after you even if you declare bankruptcy. This way you could have kept the house and got rid of all the other debt. I have no idea exactly where you live, but I'm sure things will get better. It's a tough lesson to learn, but I sure you won't make those crazy decisions again. Oh, and make sure if you have kids again that your wife works if you can't pay all the bills. There are plenty of jobs that your wife can do from home. I work from home, and I make more money working from home than I did from working at 9-5 type of jobs. Everyone needs to pitch in. You just can't try to do everything on your own!

January 28 2014 at 8:10 AM Report abuse rate up rate down Reply
standfordgrays

Everyone has to grow up some time, Dave Laundry Jr... But, as for financial advisors, avoid them like the plague !!! I have a friend who is a CPA that manages a trust for a financial advisor at a bank. She is always calling up my CPA friend and asking questions like "what is my max contribution to an IRA"... A financial advisor that doesn't know that kind of basic information is like having a mechanic that doesn't know what do spark plugs do. Or a carpenter that asks what a level is for. Imagine a cook that doesn't know how much salt to put in the food, think they make a good cook ?... Anyway, this financial advisor makes about $75,000 at a bank to give people advice on their finances and sell them on bank services and mutual funds. On top of her $75,000 a year, she will pull out $50,000 from her trust (her and a husband, no kids)... My CPA friend warns her that when she pulls money out of the trust, she will have to pay income taxes on it at the end of the year.. So come the end of the year, she is standing in my friend's office yelling and screaming at him while accusing him of stealing from her because her tax bill is so high. My CPA friend does these trusts for her grandpa who made the money, otherwise he would tell her to go someplace else. In addition to that, he does her taxes for her for only $100. These are complicated taxes, not 1040EZ with just a w-2 type stuff. We are talking schedule D, K, etc.. HR Block or another CPA would charge no less than $400 if all the paperwork is in order. But, there she is screaming at my friend because his $100 plus what she owes the IRS from taking out money from her trust has given her sticker shock. On the bill It states plain and clear that my friend is only charging $100 to do the taxes and the rest is owed to the IRs, but the stupid chick can't read a simple bill... This is supposed to be a bank professional financial advisor !!!.... I know another chick that just graduated with an EMBA, never had to take the GMAT, has never had any investments or business in her life that just got hired on to be a financial advisor for a major firm.. She was rushed through the series 7 certification and other tests and is now giving out financial advice while she is dirt poor and in debt for more than just student loans. In the end... stay the hell away from financial advisors that don't have a head full of gray hair, and maybe not even then.

January 28 2014 at 6:23 AM Report abuse rate up rate down Reply
Michael

Idiot....

January 28 2014 at 5:50 AM Report abuse -1 rate up rate down Reply
Fran

Mr. Landry -- Some things you said makes me think that you had to file a Chap. 13? You write about 'paying down your debt', and that happens only with a Chap. 13.

I had to file a Chap. 13. And while I am glad that I paid back my debt (almost 100%) and with 7% interest, life was extremely difficult for almost 5 years (only 17% of filers complete a Chap. 13 -- it's just such a very difficult and punitive situation). On the other hand, I learned what was most important in life and I learned (the hard way) that material possessions really don't matter at all (as long as one has enough food, shelter, some clothing and basic medical care -- unfortunately, dental care had to be put on hold). I learned many other things too, and while I absolutely would not want to go through it again, I began to see it (Chap. 13) as a big blessing, about 1-2 years into the 5 years, and I still see it that way.

January 28 2014 at 4:15 AM Report abuse rate up rate down Reply
Fran

Very good article, Mr. Landry. I understand how this happens because it happened to me.

Sorry more people aren't more compassionate and understanding.

January 28 2014 at 3:36 AM Report abuse +1 rate up rate down Reply
1 reply to Fran's comment
standfordgrays

some people never got to make good money in the first place to act like an a-hole with debt.... It is his own fault for not being responsible with his cash. His parents probably spoiled him his entire life.

January 28 2014 at 6:29 AM Report abuse -1 rate up rate down Reply
raidrmik67

Dave Landry Jr. is a personal finance adviser and former accounts manager for several large companies. He enjoys blogging and creating infographics in his spare time, and frequently works with DepositAccounts.com to assist people in opening the savings, checking or CD account that is right for them.>>>>>

LOL, FORMER accounts manager, now he''s an online "help" assistant.

January 27 2014 at 11:07 PM Report abuse -2 rate up rate down Reply
1 reply to raidrmik67's comment
standfordgrays

ha ha.... sounds like the greeter at my bank who helps people open up their savings account... Ole Dave got demoted to glorified teller.

January 28 2014 at 6:30 AM Report abuse rate up rate down Reply