In the wide realm of personal struggles, bankruptcy, and financial trauma remain a rather pervasive and even overlooked form of personal distress. Social stigma, shame, and other factors often stop people from seeking mental health and wellness support after they have been negatively impacted by bankruptcy or another financial trauma.
Understanding financial and bankruptcy trauma requires an empathetic view. It’s more than the traditional notions of financial stress. External factors and circumstances often play a big role in financial troubles and filing for bankruptcy. Delving into the depths of this is important to understand the internal emotional stress that these financial strains place on an individual.
In this series on financial and bankruptcy trauma, I’ll use a range of blog posts to shed light on financial and bankruptcy trauma, what it is, the signs and profound impacts it has on people, the best strategies for healing and resolving this kind of trauma, and the Naked Bankruptcy Trauma Program.
What is Bankruptcy?
Bankruptcy is a legal process that is designed to help individuals deal with an overwhelming amount of debt. It’s a bit like hitting the reset button on your finances. The bankruptcy process is designed for people who simply cannot pay back what they owe creditors, banks, or other individuals.
The court steps in and takes control of the financial situation. They will assess your debt, income, and assets to figure out the best way forward. Depending on your circumstances and the amount you owe, your debts could be forgiven. Once your assets, income, and other factors have been assessed, the court will establish how to structure your financial situation. The priority is to pay off what you owe, and this can be done in a variety of ways.
If you have assets such as property or vehicles, these are likely to be sold to pay your creditors. Your bank accounts will be frozen, and you will only be able to use money that is released for use by the trustee in charge of your account. A percentage of your income if you have a full-time job can be used, as well as the sale of your business if you are self-employed.
If there is money left over after all your debts are paid, you can file to have your bankruptcy cancelled. However, in most cases, people will not have much left over and need the support to start their life and financial situation from scratch.
While it’s seen as a way to start anew, it can be an extremely traumatic process.
The Trauma of Bankruptcy
Bankruptcy has the potential to create profound trauma. The most common causes of this trauma come as a result of the following:
Loss of Financial Stability
Bankruptcy can cause huge financial instability, particularly for people who don’t have full-time jobs or who have a family to support. Not knowing where or when your next pay cheque will come from, how you’re going to pay your kid’s school fees, feed your family, or pay rent places enormous pressure on an individual. This can often lead to high levels of anxiety and depression. In fact, research from the American Journal of Epidemiology has shown that people who experience stress from financial issues are 20 times more likely to attempt suicide than those who do not experience this type of stress.
Shame and Stigma
Societal and systemic factors also play a big role in bankruptcy and financial trauma. There is a certain amount of stigma associated with filing for bankruptcy, and it places a strain on social situations. Most people won’t tell their friends or family that they have applied for bankruptcy because of fear of judgment. Individuals feel like they have failed financially and that this reflects on their value to society as a whole. Shame is a massive emotional response associated with bankruptcy trauma.
Relationship strain
Financial troubles are one of the main causes of relationship strain and divorce. Going bankrupt is not an easy process, and often, this takes a toll on the health of a relationship, which, in turn, only serves to make the trauma of the process worse. Now, not only has an individual lost their home, car, and business, but they’ve also lost their partner. It’s not just relationships with partners that can be impacted either. Kids, family members, and friends can all fall under this type of strain, and it can lead to feelings of isolation and lack of support.
Signs and Symptoms of Bankruptcy and Financial
People going through bankruptcy have to navigate a psychosocial crisis of identity, shame, and financial insecurity, all of which can lead to PTSD. It’s important to recognise the signs and symptoms of this kind of trauma in order to heal and recover.
In the next blog, we’re going to have a look at what to look out for.
Contact us if you’d like to know more about Trauma bankruptcy trauma or if you’d like to help someone going through bankruptcy.
