Debts are not only a financial burden for those affected, in many cases a debt problem is also accompanied by strong psychological pressure. Existential fears and the feeling of failure determine everyday life and make it even more difficult to cope with the debt burden. Letters are not opened, social contacts are avoided out of shame, accompanied by a constant fear that at some point the bailiff will be at the door.
Debtors are particularly often affected by mental health problems
However, these people are not alone in this situation. Around four out of ten indebted people state that they suffer from physical problems. The most common sequelae here include self-esteem problems, depression, anxiety and the consumption of luxury foods that are harmful to health.
Problematic interaction between psychological stress and debt
However, the direction of action should not only be viewed from one side. Debts often do not arise overnight, acute illnesses, family problems or existing psychological complaints can also trigger a financial emergency. A vicious circle arises: while debts pile up and more and more reminders flutter into the house, those affected become more and more hopeless and – in their fear and depression – more and more unable to act. Companies are even threatened with a delay in bankruptcy, which in the worst case can lead to imprisonment.
Three steps to counteract psychological stress caused by debt
1. Initiate bankruptcy proceedings
As the study by Mr. Ruger shows, submitting an affidavit and filing for bankruptcy are associated with a lower likelihood of mental illness. By confessing to have failed and the will to change something in their own life situation, those affected seem to activate completely new forces. Life goes on, order is created and the ideas of catastrophe and existential fears associated with insolvency proceedings are put into perspective.
2. Maintain social networks
What applies to almost every form of psychological stress is also shown here: maintaining social contacts is blatantly important in order to overcome bad phases in life, gain courage and be able to ask someone for advice when you are no longer in the woods for the trees sees. Loneliness and a lack of social support, on the other hand, can further intensify depression, feelings of helplessness and fears. The better the social network, the less often people suffer from the psychological consequences of bankruptcy.
3. Seek psychological advice
Maintaining social contacts, initiating bankruptcy proceedings, etc. are all easier said than done. However, many sufferers fail because of the simple task of going to a debt counseling service or a lawyer. Even the walk to the mailbox is often a torture. You see an insurmountable mountain of bureaucracy, unpleasant visits to the authorities and confessions of guilt coming your way. Sometimes you are so busy struggling with your anxiety and lack of drive that you hardly have any energy left for anything else. Basically, you have come to a point where you are dealing with the debt problem without professional psychological help can no longer work. In this case, it can make sense to take advantage of psychological counseling, for example to initially reduce symptoms of anxiety and depression, to organize your own thoughts and to plan and tackle the first steps out of the debt trap together. The motto here is “better an end with horror than horror without end!”.
Personal bankruptcy is not always the ideal solution
“With a personal bankruptcy you will be rid of your debts in six years.” That sounds tempting, but should be treated with caution. For young people in particular, personal bankruptcy is not necessarily the best path to a debt-free future. It pays to know exactly what this entails in order to make the right decision.
The biggest benefit of consumer bankruptcy is that your debts are in order; bankruptcy attorney may help you tackle this task. There are clear legal regulations according to which you will become debt-free again. This gives you security and the certainty that you will be released from the remaining debt after a maximum of six years. So far so good.
But there are a lot of hurdles: You have to meet deadlines, work, pay off, shouldn’t incur any new debts. Before you go down this path, be honest with yourself: How did you manage this in the past? How likely are you to hold out? Who can help you with this?
The alternative to bankruptcy: You negotiate directly with the creditors, i.e. the companies or people to whom you owe money, and offer them a settlement. It looks like that you
pay part of the claim in a short time (in one piece or in installments) and the creditors forego the rest. This can be a better solution if your mountain of debt is not that high.
Are you eligible for personal bankruptcy?
Bankruptcy is an option for people whose income does not improve in the next few years. In the case of young people who are currently in training and who will probably earn better after they graduate, personal bankruptcy can possibly obstruct some opportunities. The situation is different with extremely high debts that take care of every future perspective.
Speaks for a personal bankruptcy
- You don’t see any chance of paying off your debts in any way in the years to come.
- Appointments are not a problem for you. You rarely say sentences like: “I was sick, I forgot, I slept through it, what kind of appointment?”
- You know what budget planning is and how to live without running into new debts.
- You want to keep order, read all reminders and other letters and react accordingly immediately.
- You can live with your situation being made public (register, landlord, employer, bank …).
Speaks against personal bankruptcy
- You need a lot of discipline and perseverance until you get your remaining debt after six years.
- If you do not meet the requirements, you will be kicked out of bankruptcy and will have to pay the procedural costs (additionally).
- The procedural costs for a private bankruptcy are around $ 2,000. These can be deferred by the court. However, up to four years after the remaining debt has been discharged, it will be checked again whether you can bear these costs.
- The attachable portion of the income is attached for six years. This means: If you earn more than $ 1,133.80, part of your income will be deducted from your wages (as of 2017, the garnishment table applies).
- You have to disclose your financial situation. Your employer and your landlord will be informed of the bankruptcy
Ultimately, it’s always up to you – get on with it!
If you come to the conclusion – alone or in a consultation – that personal bankruptcy is not the solution for you, you should start reducing your debts yourself. How to get close to the solution in five steps can be found here. Important: Whether you want to practice your budget planning first, consider bankruptcy or look for other solutions with the creditors: You will receive support in debt counseling.