The 6 stages of debt, and whether to declare bankruptcy

Think back to when you were making those lofty life goals. You know, the nice house, the successful career, that sort of thing. Was being in debt one of your goals?

Didn’t think so.

Unfortunately, people sometimes find themselves caught in the debt trap and struggling to get out. They didn’t plan it. It just happened for one reason or another.

As part of our insolvency business we’ve seen a lot of people who’ve been living off an oily rag for years, struggling to stay one step ahead of their creditors. Some have their heads in the proverbial sand, ignoring the problem and hoping it will just go away. And others are desperately trying to hold on because they don’t want to throw in the towel and declare bankruptcy.

Filing for bankruptcy is a very personal decision. It’s usually the last resort when dealing with your debts, and many people see it as admitting failure.

But if your debts are completely unmanageable then you need to do something. And while you probably never dreamed of declaring yourself bankrupt, the sooner you do the sooner you’ll be able to clear your debts and get on with your life.

As we said earlier, we’ve seen a lot of people in debt. And over the years we’ve developed what we call ‘The six stages of debt’. Here’s an explanation of each stage. Do any of them sound familiar?

1. Credit binge

While credit is easy to get, paying it off can be difficult if you don’t manage it responsibly. We often see people living above their means and buying luxury items (holidays, cars, bikes, etc.) with credit.

And it’s such an easy trap to fall into. You start with one credit card, and pretty soon wind up with three or four credit cards—all maxed out.

2. Payment juggling

Now the bills from your creditors start coming in, and handling your money becomes a juggling act. You try desperately to pay your creditors without it having an impact on your family or your lifestyle. But before you know it you’re falling behind with the repayments.

You tell creditors you’ll have the money “next month”—a phrase you find yourself repeating as time goes on. You may even resort to getting payday loans (which create even more debt) or even pawning your possessions to raise the funds.

By now you’re missing payments regularly, and facing a barrage of phone calls and letter chasing payment.

3. Denial

By now your financial situation is out of control. But instead of doing something about it you stick your head in the proverbial sand, hoping that if you ignore it long enough it will just go away.

You stop answering the phone in case it’s a creditor. You insist on collecting the mail so you can hide the demand letters from your family and friends.

You’re embarrassed. Ashamed. Worried. “How can I tell my partner we could lose the house? What do I tell my friends?”

You may find yourself stuck in this phase for a long time. Denial can be a very powerful tool for dealing with things we don’t want to face. But when the realisation finally hits, you may feel like you’ve reached a low point in your life.

And lost. So incredibly lost.

4. Feeling lost

By now the debt collectors are calling you constantly. You may have had a visit from the sheriff, and the bank may be taking steps to repossess your car, or even your house.

You feel stuck, with no way forward. In fact, it seems like the only direction you can go is down.

If you haven’t already, you really need to talk to a qualified insolvency expert. You should also consider getting professional counselling if you need it.

5. Optimism

You start doing a bit of research, and realise that bankruptcy isn’t necessarily your only option. Turns out there are a number of solutions for dealing with unmanageable debt—repayment arrangements, debt consolidation, debt agreements and personal insolvency agreements.

Here at Rapsey Griffiths we provide a confidential and independent debt advice and information service. We can look into your situation, run you through your options (giving you the pros and cons of each one), and let you decide what’s best for you.

6. Relief

Using the advice received from the insolvency expert, you start taking action. After being out of control for so long you start taking it back, making the necessary changes to finally address your financial situation.

You can almost feel the weight being lifted from your shoulders. The pressure eases. Life starts to return to normal. And you’re left wondering why it took you so long to act in the first place.

After what seems like a lifetime of being in debt, you can finally put it all behind you and move on with your life.

No matter what stage you’re at with your debts, we can help. So don’t put that sense of relief off a minute longer. Get in touch with Rapsey Griffiths today so we can help you deal with your debt and, more importantly, get on with your life.