Admitting you're bankrupt is not easy

"I declared myself bankrupt at the end of May 1990 at 1.27 in the afternoon. I think it was a Thursday. All I had in the bank was debt. Lots of it. I was 24 years old."

One young woman, Ann Johnson*, went bankrupt and learnt that it wasn't an easy way out.

In the late 1980s, I ran my own business painting and decorating. I was pretty good at it and never out of work. I'd like to blame my bankruptcy on the back injury I got at work, but the truth is, I was massively in debt long before I fell off the ladder.

One of my main problems was that I was clueless at pricing up my jobs - I was too cheap. To make matters worse, I squandered any cash I made on the most ridiculous things: I ate out all the time and one Thursday flew to Toronto to see some friends – just for the weekend! Hey, it was the eighties, and flashing your cash was compulsory. If you didn’t have it? Not a problem, just stick it on a card. There were plenty of respectable, legitimate financial institutions happy to ply me with the latest credit card without asking too many questions. Just like there are today.

My bank was also very accommodating. They gave me a £4,000 overdraft facility and I used all of that; a credit card with a £4,000 limit, then a £4,000 loan to make improvements to my house, which I spent that paying my mortgage. I don’t know what the deal was with the number four but I used it all.

While off work because of my back injury, soaring interest rates pushed my mortgage payments from £355 to £644 a month. Trying to keep my head above water, I accrued £22,000 in credit card and mortgage debt with no job and no way of paying it back. I was now financially, as well as physically, paralysed. Sixteen years ago and I still remember the figures like it was yesterday. That should tell you something.

A clean slate

Ten months later I was back on my feet, but still swamped in debt. I was sitting in a café with my dad trying to work out how to even begin to chip away at the insurmountable debt, but saw no way out. That was when he suggested I could declare myself bankrupt. The thought had never occurred to me but, as he explained it, I felt a little knot of excitement build in my stomach. Here was a way to wipe out my entire debt in one fell swoop. I could start again, debt free with a clean slate.

Without a second thought, there I was a few days later, filling out the forms and handing over my money (even going bust costs!) to the nice lady in the county court cashier's office. I had to swear an oath that the information I had provided was true and 'no, I didn’t have twenty grand stashed in the loft I’d forgotten to mention'.

Minutes later I found myself sitting in the magistrates' chambers with an imposing man, who looked like my granddad in a smart suit. He barely glanced at the forms - which represented the financial car crash of my life - and asked, "So, it’s all got a bit much, has it?" A classic understatement if ever I heard one, but I could only nod and offer up a meek "Yes, it has".

I wanted to cry. I wanted to throw up. I was so ashamed but at the same time I couldn’t imagine what I would do if the magistrate didn’t sign them. I could only stare at his pen, willing it to start moving across the bottom of the page. He signed the forms, wished me luck and that was it.

Rock bottom

I was bankrupt, yes. Financially hobbled for the foreseeable future, yes, but I was free! All I could think about was that my obligation to pay everyone back was gone. It seemed a simple solution at the time, but the consequences were far-reaching and would last for years.

The problems started immediately. After a week at home feeling depressed and watching Dallas repeats, BT cut my phone off even though I’d paid the bill. I was blacklisted** and word was getting around. My new bank informed me they would let me keep my account but that I could only ever expect a cash card, nothing else.

As I could no longer pay my mortgage I found a place to rent with a friend (they had to take out the lease because I couldn’t get references) then went to my building society and just handed over the keys to my house. I gave the startled man behind the counter the address and my mortgage number and walked out. I didn’t work for six months. I just couldn’t face it.
 
No one told me I would be blacklisted** for six years and that the building society could chase me for my mortgage arrears for six more years after that, because mortgage debt can’t be wiped out by bankruptcy. I couldn’t get a phone line, an overdraft or even gas and electricity switched on in my name for six years. I was a financial leper. I wasn’t free and clear until 2002. Or so I thought.
 
When I came to apply for a mortgage nine years later I had to lie when the question "Have you ever been bankrupt?" came up. I still have to lie today, 16 years later, every time I re-mortgage if I want a decent deal.
 
A cruel mistress

The only good thing to come out of bankruptcy for me is the knowledge that I’ll never put myself in that position again. It’s a cold hard place having no money and no access to any credit. Every time I feel myself reaching for something I can’t afford I imagine myself back then, walking down the high street not able to buy anything, not even a sandwich, or a drink with friends.
 
Credit is a cruel mistress and a privilege, not a right. Treat your credit right and she’ll lavish you with love and affection. Ignore and abuse her and she’ll soon let you know who’s really in charge.

For further information look at Moneymagpie's pages on bankruptcy, dealing with a bankruptcy petition and free debt advice, or listen to Jasmine's podcast on avoiding bankruptcy.

* Name has been changed at the request of the author

** A record of your bankruptcy is kept on your credit file for six years, which makes getting loans, bank accounts or mortgages difficult and expensive. Learn more about bankruptcy here.