by Lexi Inks
Debt sucks. And, if I’m being honest, I have a lot of it. Between getting a now-unused degree in musical theatre from a private university and opening credit cards for basic living expenses to getting treatment for Bipolar disorder and engaging in some impulsive financial behaviors, I’ve racked up an astonishing amount of student loan and consumer debt. Now that I’m in my 30s — and earning a much higher income — I’m ready to hit the reset button and stop drowning in my past mistakes. I just never anticipated that filing for bankruptcy would become a part of that journey.
I’m currently in the process of filing for chapter 7 bankruptcy, which feels wild to casually share. But, it’s also one of the things I’m looking forward to the most going into 2025. Did I know how bankruptcy works or that it was even an option for me 6 months ago? Not at all. It wasn’t until I came across a video series from life coach and content creator Whitney Catalano that I realized it was on the table. Catalano had filed for chapter 7 in 2022, and has become known on TikTok for her series detailing her experience. After hearing her share about how beneficial the process was for her financial health, her credit, and her mental health, I knew I needed to pursue it. Hiring my lawyer alone provided a wave of relief, because I knew that was the first step to finally getting relief — and the clean slate I wanted.
Seeing Whitney’s videos led me to discover a lot more content on the topic of bankruptcy across social media. According to both this amount of content and insight from my lawyer, there’s a significant number of folks pursuing bankruptcy right now. Among all American adults in 2023, over 433,000 people filed for bankruptcy, according to data from the Office of the U.S. Courts. While inflation, the abysmal job market, and overall state of the economy in the United States right now are obvious answers, I’ve still been wondering: why is everyone filing for bankruptcy right now?
What are the reasons to file for bankruptcy?
My parents had always instilled financial literacy and responsibility in each of their children. We were implored to save as much as possible, spend as little as possible, and focus on our education first so we could end up with well-paying jobs later in life. Despite this, my mental health challenges and overall stubbornness really prevented me from following these guidelines once I hit adulthood.
Over time, I watched my credit fall from the high 700s with each new maxed-out credit card and random loan taken out. On top of my undergraduate education expenses and dropping out of grad school halfway through my program, my student loans alone cost far more than buying a nice, brand new car would. It’s safe to say my net worth is looking really pitiful these days.
My struggles specifically with Bipolar II disorder and ADHD certainly didn’t help. Thankfully, Catalano relates to the ADHD side of my story, and she posted some helpful content about how that impacted her own financial decisions. Once she sought help from The Financial Gym, a low-cost service providing guidance for people struggling with things like debt and budgeting, Catalano learned that she was a good candidate for bankruptcy. The best course of action seemed pretty clear from there.
“I had been in debt for so long, and I’d been drowning in it, stressed out, anxious, and feeling ashamed for so long,” she says. “I had gotten to the point where I was ready to let go of the shame and ready to let go of the anxiety. So I said: I’m done. I want to wipe my hands of this. And I want to start new patterns and go about things differently. I want to learn from this, have a fresh new chapter, and a blank slate.”
While everyone has personal and unique reasons to file, bankruptcy ultimately provides that fresh start Catalano mentioned. Put simply, it’s a legal resource for people who, for whatever reasons, found themselves amassing an overwhelming amount of debt that they don’t earn enough to pay off in a reasonable amount of time. It’s an accessible way to get help and relief from a stressful, debilitating symptom of capitalism that affects many more people than you might expect. The Federal Reserve Bank of New York reported that, as of the second quarter in 2024, the total household debt in the U.S. rose to $17.8 billion.
What does filing for bankruptcy do, exactly?
One of the reasons I never even considered bankruptcy as an option for myself is because I had zero clue how it worked. On top of that, I had only known of the negative stigma surrounding it. After all, Trump (and other mega-rich MFs) have filed for bankruptcy plenty of times to avoid taking responsibility for the debt they’ve racked up. I would be doing the same, right?
Well, not really. Firstly, I’m not a billionaire. Secondly, unlike Trump and others, I do not have the means to pay off my debt anytime soon. Figuring that out was the first step to learning how to file for bankruptcy. Each state has its own laws and qualifications for people looking to file, but here in Florida, I definitely passed what is called the “means test” — a carefully calculated evaluation proving that I don’t have the financial ability to handle the amount of debt I’ve racked up.
Catalano recommends using this free Debt Relief Calculator to help you evaluate your financial situation, weigh options for dealing with your debt, and see the pros and cons of paying it off or filing for bankruptcy. You can also call 888-403-0994 if you’d rather have a free consultation with a vetted lawyer in your state to talk about your options with a professional. Either way, there are always options available at no cost to you.
Once you are sure you qualify for the bankruptcy process (which I *highly* recommend confirming with a lawyer), my state requires you to collect all your financial documents and pay a decently hefty filing fee to the court. This usually involves two years of bank statements, itemized lists and proof of your income, expenses, and all your debt accounts, and an inventory of your assets. If you own your home, a car, or any big ticket “luxury” items, those may be fair game to be taken by the court’s trustee who oversees your case. Yes — even your prized collection of Louboutins or Birkins can be snatched right up if you file for bankruptcy. If your assets exceed your state’s allotted exemption amount, you’ll likely be audited so the court can use those assets to equally distribute money back to your creditors.
Once the entirety of your financial situation has been evaluated, you’ll have what is called a 341 meeting, or “meeting of the creditors.” This gives the companies or people you owe money to a chance to show up to a court hearing — usually done remotely these days — and contest your bankruptcy. According to my lawyer and plenty of other accounts I’ve heard, your creditors are almost guaranteed to not show up to this meeting. If you filed for chapter 7 bankruptcy (which wipes out all your consumer debt, as well as credit history), 60 days after your 341 meeting, your debts will be fully discharged, and you’ll be free from consumer debt. That said, it’s important to remember that the point of filing is so you can reset and move forward from your debt-inducing behaviors; you should take this fresh start as an opportunity to rebuild your credit and learn better financial habits for the long haul.
Even though it can seem like a scary or overwhelming process — and, sometimes, it is — filing for bankruptcy doesn’t have to be a bad thing. In fact, according to Catalano, it was the best decision she’s made in her adult life.
“I feel much more in control, much more empowered, much more aware and calm around money. I think that’s huge, because really it’s so hard to explain how much it takes over your life when you’re in the thick of it,” she says. “Being on the other side and knowing that I’ll never go back there is such a relief — and it’s so freeing… this was one of the last things I had to do in a cycle of seven or eight years of lessons. I think my only regret is that I didn’t do it sooner.”
